According to the Bank’s latest forecasts, Malta’s gross domestic product (GDP) is expected to grow by 4.9% in 2024. Growth is then projected to ease to 3.9% in 2025, 3.6% in 2026 and 3.4% in 2027. This implies an upward revision for each year up to 2026 when compared to the Bank’s previous projection round, largely reflecting a carryover from the significant upward revision in past data, especially in 2023 following the benchmark revision in national accounts.
Growth over the projection horizon is expected to be driven by domestic demand, reflecting continued rapid growth in private consumption, in part driven by a reduction in the income tax burden, and a gradual recovery in private investment following the sharp contraction recorded in 2023. The contribution of net exports is also expected to be positive but smaller than that of domestic demand.
Employment growth is set to moderate, albeit from high rates, with the unemployment rate remaining close to, but marginally above 3%.
Wages are expected to grow at a significantly faster rate in 2024, partly as a delayed response to past inflation, but also because of a tight labour market. Thereafter, they are expected to moderate somewhat due to reduced inflationary pressures.
Annual inflation based on the Harmonised Index of Consumer Prices is, in fact, projected to drop significantly, from 5.6% in 2023 to 2.5% in 2024, before reaching 2.0% by 2026. Compared to previous projections, overall inflation remains unchanged in 2024 and 2026, but it has been revised up by 0.1 percentage point in 2025, the latter arising mainly from wage-sensitive components and the forecasted increase in consumption.
The general government deficit-to-GDP ratio is set to decline from 4.5% in 2023 to 3.9% in 2024, and to narrow further over the rest of the forecast horizon. By 2027, the deficit is forecast to reach 2.7% of GDP. The government debt-to-GDP ratio is set to increase throughout the forecast horizon, reaching 50.9% by 2027. The forecast deficit-to-GDP ratio is mostly unchanged compared with the Bank’s August projections, as a more favourable macroeconomic outlook is counterbalanced by the impact of new measures announced in the 2025 budget. Meanwhile, the debt-to-GDP ratio was revised downwards, largely as a result of the national accounts benchmark revision.
Further out, risks to activity are broadly balanced. Downside risks largely emanate from possible adverse trade effects related to geopolitical tensions, higher US tariffs, and the possibility of retaliatory measures. On the other hand, the labour market could exhibit even stronger dynamics than envisaged in this projection round, both in terms of employment and wages.
Risks to inflation are slightly tilted to the upside over the projection horizon. These stem from renewed supply-side bottlenecks that could be triggered by ongoing geopolitical conflicts as well as shifts in global trade policy. Furthermore, wage pressures could be stronger than envisaged in the baseline. Moreover, unfavourable weather conditions and some policies supporting the green transition could also push up inflation, although such effects might be temporary. On the downside, imported inflation could fall more rapidly than expected if the global disinflation process proceeds faster than assumed or if policy uncertainty weighs strongly on global demand.
As regards to the fiscal position, risks are mostly tilted to the downside (deficit-increasing), mainly reflecting the possibility of slippages in current expenditure, including higher-than-expected outlays on energy support measures, if commodity prices are higher than assumed. They also reflect the likelihood of additional increases in pensions and wages in the outer year. These risks are partly offset by the likelihood of higher-than-expected growth in tax revenue particularly in 2024 due to greater efficiency in tax collection.
| 2023 | 2024 | 2025 | 2026 | 2027 | |
| GDP growth (% yoy) | 7.5 | 4.9 | 3.9 | 3.6 | 3.4 |
| Inflation rate (% yoy) | 5.6 | 2.5 | 2.2 | 2.0 | 2.0 |
| Unemployment rate (% of labour force) | 3.5 | 3.2 | 3.2 | 3.1 | 3.1 |
| General Government budget balance (% of GDP) | -4.5 | -3.9 | -3.5 | -3.0 | -2.7 |
| General Government debt (% of GDP) | 47.4 | 49.4 | 50.2 | 50.8 | 50.9 |
More details on the Bank’s latest projections can be found here.