Inflation edges higher, unemployment falls to 3.5% while tourism maintains strong momentum
Economic activity in Malta remained broadly in line with its long-term average, with business conditions showing a modest improvement in July, according to the Central Bank of Malta’s latest Economic Update.
The Bank’s Business Conditions Index pointed to a strengthening in conditions during July, although the indicator remained slightly below its historical average.
The latest data presents a mixed picture across different sectors of the economy. Retail activity continued to grow in June, but at a more moderate pace, while services production also recorded slower growth in May. Industrial production, meanwhile, declined in annual terms and continued to display a volatile pattern.
Tourism remained one of the stronger performers, maintaining its momentum in June.
Consumer confidence weakened in July, although sentiment remained well above its historical average. At the same time, unemployment expectations continued to point towards relatively low unemployment over the coming year.
The labour market also showed some improvement. Malta’s unemployment rate fell slightly to 3.5% in June from May, although it remained higher than the rate recorded a year earlier.
Property market remains strong
Conditions in Malta’s property market remained robust, with both supply and demand continuing to show strength.
The number of residential and commercial development permits approved in July was lower than a year earlier, but increased compared with June. Similar movements were recorded in final deeds and promise-of-sale agreements, reflecting continued activity on the demand side of the market.
Inflation remains below euro area level
Inflation increased marginally in July but remained significantly below the rate recorded across the euro area.
The Harmonised Index of Consumer Prices (HICP) rose to an annual rate of 2.1% in July, up from 2.0% in June. Core HICP inflation, which excludes food and energy, stood at 2.3%.
The Central Bank noted that both headline and core HICP inflation across the euro area were higher than Malta’s, largely because of higher energy inflation.
According to Malta’s Retail Price Index, inflation increased to 2.7% in July.
Government deficit narrows
The government’s fiscal position also improved in June, with the Consolidated Fund recording a smaller deficit than a year earlier.
The Central Bank attributed the improvement primarily to stronger growth in government revenue.
Meanwhile, the annual rate of growth in deposits and credit held by Maltese residents increased compared with May, indicating stronger growth in both areas.
Overall, the August Economic Update points to an economy that continues to expand at a relatively steady pace, supported by strong tourism and property-market activity, while inflation remains comparatively contained. At the same time, slower growth in retail and services and continued volatility in industrial production highlight some of the uneven trends across the economy.
