The European Economic Forecast for Autumn 2022 revealed that Malta’s deficit is among the highest in the European Union (EU).
Malta’s government deficit sat at 6% of GDP in 2022, which is a decrease from 7.8% of GDP in 2021.
The main reason behind this high deficit was the increase in public expenditure to subsidise high energy and food prices. The study said that this is the case “despite strong nominal GDP growth and the phasing out of pandemic-related support measures.”
The subsidies are supposed to account for 2.9% of GDP in 2022, 3.5% of GDP in 2023 and 2.7% of GDP in 2024. Therefore, the government deficit is expected to marginally decrease to 5.7% in 2023 and to 4.4% in 2024.
The Maltese economy is expected to grow strongly by 5.7% in 2022. A lot of this has to do with the tourism sector which already reached 80% of the tourists and expenditure in 2019, and it is expected to grow further.
The study predicts that in 2023 economic growth is expected to have a moderate growth of 2.8% as export and domestic demand growth diminishes. These are the main factors which are having a major impact on the Maltese economy.
It also revealed that Malta will continue to have labour shortages in the coming years, as the demand for labour remains high in the hospitality and catering industry and Malta continues to add foreign workers to its labour force.
In 2022 the unemployment rate in Malta is 3.2% but it is expected to further decrease to an all-time low in 2023 and 2024.
When talking about inflation the study showed that despite Malta’s efforts to combat inflation through government subsidies, in 2022 inflation is still expected to rise to 6.1%. It pointed out that inflation was quite high in imported goods, food, hospitality, transport, and housing services.
Inflation is expected to rise to 4% in 2023, with wage increases being moderate.
Lastly, it showed that public debt is set to increase to 57.4% in 2022, and it should gradually reach 60.6% in 2024.