The Economist Intelligence Unit’s Malta Country Report

The following is a political and economic outlook summary for the Economist Intelligence Unit’s Malta Country Report:

• The Labour Party government holds 37 of 67 seats in parliament, implying that the government has scope to implement its policy plans, although maintaining momentum may prove difficult. • Political uncertainty has risen in the country owing to the ongoing magisterial enquiries linked to graft allegations and international scrutiny following the murder of Daphne Caruana Galizia, an investigative journalist and blogger. • Ms Caruana Galizia's death has raised questions about media freedom on the island, as well as the reach of organised crime, which is suspected to have played a role in orchestrating her assassination, carried out in a car bombing in October 2017. • Nonetheless, although a cabinet reshuffle is a possibility, the PL's majority in parliament means that there is a lower probability of another

snap election. • The public accounts posted a surplus of 1.1% of GDP in 2016. The Economist Intelligence Unit estimates a surplus of 1.9% of GDP in 2017 and forecasts surpluses of 1.3% on average in 2018-19. • Since 2011 real GDP growth has been driven by net exports and, to a slightly lesser extent, by domestic demand. The EIU expects this trend to continue in 2018-19. • In 2017 real GDP growth rose to an estimated 6.9%. The EIU now forecasts a gradual moderation in the pace of growth, to 5.9% this year and 4.5% in 2019. • As a small, open economy with a financial sector several times the size of its annual GDP, Malta is vulnerable to heightened financial market volatility. However, the EIU expects downside risks in 2018-19 to be contained.