GDP growth, inflation, inbound tourism and economic sentiment

Last Updated on Saturday, 9 December, 2023 at 10:41 am by Andre Camilleri

In the past days the National Statistics Office issued the latest GDP figures for Q3 2023. While GDP in volume terms grew by around 7% when compared to Q3 2022, it is important to understand the mechanics that is fuelling this growth. On one hand overall consumption decreased by just over 3%. However, if we are to have a deeper look at this, we see that this overall decrease in consumption is coming from a 26% decrease in Gross Capital Formation, mainly fuelled by a decrease in investments in Machinery and Equipment. If we were to exclude the Gross Capital Formation from Consumption, the overall Final Consumption Expenditure on a volume basis in Q3 2023 increased by 7% when compared to Q3 2022. GDP growth in Q3 2023 was also fuelled by an increase in exports of goods and services, which increased by around 10%.

The initial inflation HICP figures for November indicate that headline inflation in the euro area stood at 2.4% while for Malta this stood at 3.8%. However, a closer look indicates even that in November, the euro area headline inflation is decreasing mainly due to a decrease in energy prices. If we take the HICP-based inflation for November that excludes energy, we find that the euro average inflation stood at 4.3%, while that for Malta stood at 4.1%. Even if we take the HICP-based inflation for November for services only, we find that the euro average stood at 4% while Malta stood at 3.9%.

The latest inbound tourism figures indicate that Malta had a good tourism month in October where we had 11% more tourists than in October 2019. Additionally, what is much more significant is that real expenditure per tourist in October has increased by 2.7% when compared to October 2019. Taking the full period January to October, we can see that tourists’ arrivals for the period increased by 7.6% when compared to the same period in 2019. However, total real expenditure per tourist for the period in 2023 was 2.2% less than for the same period in 2019.

A few days ago, the Central Bank of Malta issued its November economic update. In such an update it always includes the latest statistic on the European Commission’s Economic Sentiment Indicator (ESI) for Malta, for the previous month. Overall such ESI for Malta decreased to 102.9 in October, from its all-time high of 119.6 in September. Confidence in the retail sector fell to reach 0.1, as retailers’ expectations of business activity over the next three months and their assessment of sales in recent months, were less positive in October. On the other hand, the confidence indicator for the construction sector fell -11.9 in October, down from -2.7 in September, reflecting a more negative assessment of employment expectations over the next three months and of the current overall order book levels. Consumer confidence stood at -16.2 in October, well below the -9.9 recorded in the previous month. Consumers’ expectations of the general economic situation, and to a lesser extent, of their financial situation over the next 12 months, stood more negative compared with September. At the same time, respondents’ expectations of major purchases fell into negative territory. The sentiment indicator for the services sector reached 25.8 in October, from 15.9 a month earlier. Service firms’ expectations of demand over the next three months and their assessment of demand in recent months, improved significantly.

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