Government debt expected to reach 60.9% by 2024-Central Bank
Malta is set to remain in deficit until at least 2024, yet the GDP is predicted to grow by 6% this year as it steadily recovers from the effects of Covid-19, according to the Central Bank of Malta.
At the presentation of its annual report on Wednesday, the bank said the government balance is expected to remain in deficit for the forthcoming years, although narrowing to 3.3% of GDP by 2024 as Covid-19 -related support measures are phased out. Government debt is set to reach 60.9% of GDP by that year.
The current negative account balance reflects a significant increase in imports, including the aviation sector. Tourism-related earnings, while recovering, remained well below pre-pandemic levels, the Bank said.
Central Bank governor Professor Edward Scicluna said inflationary pressures are expected to remain elevated throughout this year but should start to dissipate in 2023, as supply bottlenecks are predicted to gradually fade.
Scicluna discussed the inflationary pressures in global economies, including in the euro area.
He detailed how inflation went down slightly from 0.8% in 2020, to 0.7% in 2021, then rose to 2.6% in December, as the effect of international pricing began to hit Malta.
Scicluna also added prolonged geopolitical tensions in Europe could also lead to higher imported inflation than envisaged by the European Central Bank, such as the ongoing impact of the Ukrainian war.
The annual report also detailed how the economy grew by 9.4% last year as it recovered from the effects of the pandemic. The increase in GDP was marginally above that of 2019.
Scicluna noted the CBM’s latest projections indicate that economic activity levels are expected to continue recovering in 2022. “As economic activity levels have already returned to those prevailing before the pandemic, growth is expected to moderate to more normal levels,” he said.
The CBM expects GDP will grow by 6% in 2022, 5.3% in 2023 and 3.8% in 2024. Domestic demand resulted in growth during 2021, as well as net exports.
Positively, Malta’s unemployment rate averaged 3.7 per cent between January and September 2021, down from 4.3 per cent in the same period of 2020 – well below its average since at least 2003 and the average rate in the euro area. Moreover, employment in Malta has continued to benefit from the ongoing normalisation of economic activity in a tight labour market and Covid-related support measures, notably the wage supplement scheme.