GIBRALTAR: ECONOMY

In this Section:

- GIBRALTAR THE COUNTRY AND ITS ECONOMY
- GIBRALTAR EXECUTIVE SUMMARY
- GIBRALTAR THE ISLAND OF GIBRALTAR
- GIBRALTAR SERVICES DIRECTORY
- GIBRALTAR MAP OF GIBRALTAR

The Economy of Gibraltar

The economy used to be substantially dominated by the British naval dockyard and military presence, but major cut-backs over the last few decades have reduced the share of such expenditure to a small fraction of the local economy. Magnificent port facilities remain, so that shipping and tourism are the mainstays of the economy. Several million people visit Gibraltar annually, many of them evidently stepping ashore from cruise liners (see below for recent visitor numbers). There is a fair amount of local construction work on the hotel/conferencing sector, and to accommodate wealthy expatriates.

The Government has primarily, however, pinned its hopes for the future on the financial services sector, which has been growing rapidly. Growth in the technology sector is also promising, with a number of large betting and gaming companies taking advantage of the low-tax regime and good telecommunications facilities.

The currency is the Gibraltar pound (£G) = 100 pence and is at par with the British pound. There are no exchange controls in Gibraltar.

In his June, 2005, budget speech, Chief Minister Peter Caruana noted that Gibraltar's Finance Centre continued to grow and remained in healthy shape despite the challenges brought by both the EU's insistence that the territory change its offshore tax regime and the Savings Tax Directive.

Caruana added: "The gaming industry continues to grow impressively and has now become a significant part our economy. As at April 2005, there are now 15 operators employing 1,107 people, compared to 11 operators employing 837 people in June last year. This represents a 32% increase in jobs in less than 1 year," he explained.

"This growth in the gaming industry has produced not just 1,107 jobs, but also a substantial increase in Government revenue. Not only do those 1,107 people pay income tax to Government, but the industry also paid £4.3 million to Government last year in Gaming Tax. This is up from £1.8 million in 2000/01, an increase of 138%. This yield is expected to rise this year as Government increases, not the rate of Gaming Tax, but the cap to which it is subject."

In August 2006, the Gibraltar authorities revealed that the economy was performing well, with GDP growth in 2005 estimated at 7%, after 10.4% growth in 2004. Per capita GDP was expected to record a new high of GBP21,000, the 10th highest in the world.

The Government estimated revenue of GBP250 million (up 1.63%) in 2006-07 and expenditure of GBP232.7 million (up 3.88%), resulting in a surplus of GBP17.3 million. Public debt remained static in absolute cash terms at GBP93 million. This represented 15.7% of GDP, compared with the OECD benchmark of 40% and the EU target under the Maastricht Treaty of 60%.

Inflation ran at 2.9% and employment within the economically-active Gibraltarian population was estimated at 97% at the time the figures were released, representing almost full employment.

The government stated at that time that Gibraltar’s economy was well diversified, with tourism and financial services accounting for approximately 30% of the economy each, the port and shipping 25%, and service-related activities such as telecommunications, ecommerce and e-gaming accounting for the remaining 15%.

According to Chief minister Peter Caruana's 2009 budget speech, the economy grew by 8.8% in 2007/8 to GIP804m. In the year to March 2009 the economy was estimated to have grown by nearly 6% to GIP850m. He said that the Net Public Debt fell to 7.5% of GDP in 2008 while the government had an overall budget surplus of GBP15 million for 2008/2009. overall revenue was GIP304m. Overall expenditure was GIP289m.

Revenue from personal and Company Tax, Gaming taxes and Social Insurance contributions and import duties rose to record levels, despite the global economic downturn, Caruana said.

Inflation held steady at 2.8% in 2008.

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Gibraltar Investments by Foreigners

Foreign investment in Gibraltar is actively promoted by the government largely to create job opportunites. Tax concessions have traditionally been governed by The Development Aid Ordinance. Concessions have usually been available to light manufacturers who intend to export from Gibraltar, with any corporation with a development aid license granted by the governor for a project that will benefit Gibraltar's economy exempted from paying income tax on profit earned from the development until the total gains from the development exceed the percentage of approved capital expenditure.

To qualify for a license, projects are usually required to provide at least two housing units in Gibraltar; create new industry; provide a material and immovable asset in Gibraltar; develop the tourist industry; provide new employment opportunities or tangibly enhance the economic or financial infrastructure of Gibraltar.