GDP up by 4.2%, double the rate registered in Euro Area

During the first quarter of 2017, real gross domestic product (GDP) in Malta rose by 4.2% on an annual basis, more than double the rate registered for the Euro Area as a whole. Growth was mainly driven by domestic demand, although net exports also contributed.

The labour market remained dynamic. Employment continued to increase and unemployment declined from already low levels.

This information was made public through the Quarterly Review for 2017 of the Malta Central Bank. The report analyses economic and financial developments in Malta and abroad during the first quarter of 2017.

The Review also includes an article which assesses the extent of change in the production structure of the Maltese economy from the 2000’s to date via the application of selected input-output techniques. Another article analyses the impact of Brexit on the Maltese economy and another one studies the process of economic convergence in Malta.

The annual rate of inflation, measured by the Harmonised Index of Consumer Prices (HICP) edged up during the first three months of the year, standing at 1.2% in March. Notwithstanding this increase, HICP inflation was below that in the euro area, where inflation stood at 1.5%.

Monetary dynamics remained robust during the first quarter of 2017. Residents’ deposits with monetary financial institutions (MFIs) operating in Malta continued to grow steadily in annual terms, while the shift to overnight deposits persisted. Credit to residents of Malta also grew further, driven by credit to general government and loans to households. On the other hand, credit to non-financial corporations declined.

With regard to fiscal developments, in the first quarter of 2017, the general government registered a surplus when compared with a deficit over the same period of 2016, reflecting higher revenue than expenditure. When measured on the basis of a four-quarter moving sum, the general government recorded a surplus of 2.1% of GDP, up from 1.0% in the fourth quarter of 2016. General government debt, as a share of GDP, stood at 59.0% at the end of March 2017.

The Review presents an overview of the monetary policy decisions taken by the Governing Council of the European Central Bank (ECB). The Council maintained its accommodative monetary policy stance during the period under review. It confirmed that the ECB’s key interest rates will remain low for an extended period of time and that its asset purchase programme (APP) is intended to continue until the end of December 2017, or beyond, if necessary. The Governing Council also recalled that net purchases will be made alongside reinvestments of principal payments from maturing securities purchased under the programme.