According to the Bank’s latest forecasts, Malta’s gross domestic product (GDP) is expected to grow by 4.4% in 2024. Growth is then expected to edge down to 3.6% in 2025, and to 3.3% by 2026. This implies an upward revision in 2024, when compared to the Bank’s previous projections, while for 2025 and 2026 the outlook is unchanged. The upward revision is mainly on account of positive revisions in private consumption and net exports in the latest national accounts data release.
While in 2023, growth is expected to have been primarily driven by net exports, domestic demand is envisaged to be the main driver of growth in 2024. Private consumption growth continues at a brisk pace and private investment, is expected to recover slowly. Net exports are also projected to contribute positively, driven mainly by services exports. Growth in 2025 and 2026 is also expected to be led by domestic demand.
Employment growth is set to moderate in the projection horizon, while wages are expected to pick-up in 2024, in view of the high inflation in the recent past, and a tight labour market.
Annual inflation based on the Harmonised Index of Consumer Prices is projected to ease from 5.6% in 2023, to 2.9% in 2024, before reaching 1.9% by 2026. It is thus foreseen to remain above the Eurosystem price stability objective this year due to lingering indirect effects through the response of wages to recent increases in input costs and profit margins. However, compared to previous projections, inflation has been revised down by 0.1 percentage point throughout the forecast period, in line with recent data outturns.
The general government deficit-to-GDP ratio is set to decline throughout the projection horizon. The general government debt-to-GDP ratio is set to increase, and to reach 54.3% by 2026. When compared with the previous projection round, the projected deficit and debt ratios were both revised downwards.
Risks to inflation are also balanced.Upside risks relate mainly to ongoing geopolitical tensions especially disruptions to trade in the Red Sea, as well as the potential impact of Fit-for-55 measures and extreme weather events. On the other hand, downside risks relate to a stronger pass-through from monetary tightening to domestic financial and real economic conditions, as well as the impact from the Government’s measure to curb prices of selected food products in the short term.
On the fiscal side, risks are tilted to the downside from 2024 (deficit-increasing). These mainly reflect the possibility of higher-than-expected outlays on energy support measures, in the event that commodity prices are higher than envisaged. They also reflect the likelihood of additional expenditure on pensions and public sector wages. These risks are partly offset by the likelihood of a pick-up in the pace of fiscal consolidation in the outer years of the forecast horizon.
This publication also includes two boxed articles. The first provides a detailed analysis of the recent developments in private consumption and implications on the Bank’s projections. The second takes a closer look at the composition of social benefits.
| 2023 | 2024 | 2025 | 2026 | |
| GDP growth (% yoy) | 6.3 | 4.4 | 3.6 | 3.3 |
| Inflation rate (% yoy) | 5.6 | 2.9 | 2.2 | 1.9 |
| Unemployment rate | 2.6 | 2.6 | 2.7 | 2.9 |
| General Government budget balance (% of GDP) | -4.5 | -4.0 | -3.5 | -3.1 |
| General Government debt (% of GDP) | 50.7 | 52.7 | 53.5 | 54.3 |
More details on the Bank’s latest projections can be found here.