Last Updated on Friday, 16 August, 2019 at 12:10 pm by Christian Keszthelyi
The Central Bank of Malta expects the Maltese economy to expand by 4.4% between 2019 and 2021. Compared with the bank’s previous projections, Gross Domestic Product (GDP) growth has been revised marginally downwards in 2019, due to a delay in a major investment project in the private sector, according to a press release published by the bank.
The central bank believes that growth in private consumption and government expenditure is expected to “remain robust” while investment is expected to recover from the contraction recorded in 2018.
During the projection horizon, GDP growth will be supported by domestic demand, mainly reflecting “robust” growth in private consumption and investment.
The net export contribution to growth is expected to be negative in 2019 and 2020, reflecting the weak international environment, and a pickup in import growth as a result of strong domestic demand. The contribution of net exports should turn positive in 2021, reflecting faster export growth, according to the press release.
Furthermore, the pace of job creation is set to moderate while the labour market is expected to remain tight, with the unemployment rate projected at 3.8% by 2021.
Annual inflation, based on the Harmonised Index of Consumer Prices (HICP), is projected to ease slightly in 2019, before edging up to 1.9% by 2021, reflecting a pick-up in services and non-energy industrial goods inflation (NEIG).
Moreover, the government balance is expected to remain in surplus over the coming years, such that the debt-to-GDP ratio is projected to decline to below 40% by 2021.
The external environment poses downside risks to the projections of economic activity and inflation while domestic risks remain largely on the upside in the medium-term.
The risks to public finances are broadly balanced due to a possible slowing down in the implementation of investment projects that could be offset by higher current expenditure.