Outlook for the Maltese Economy 2018-2020

The Central Bank of Malta’s latest economic projections foresee economic growth over the coming three years to remain strong from a historical perspective, though somewhat lower than in 2017.

These projections feature a downward revision in growth in 2018, when compared to the previous set of forecasts, reflecting lower than anticipated growth in 2017. In contrast, GDP growth in 2019 and 2020 was revised up, as selected large investment projects are expected to be delayed to these years.

Growth in the coming years will be supported by both demand and supply factors. In particular, the continued impact of the energy reforms, new investment projects and increased labour market participation will support potential output.

Moreover, domestic demand will be the primary driver supporting the economic expansion over the next three years.

As a result of the fast economic growth, the labour market is projected to remain tight, with the unemployment rate expect- ed to remain below 4% by 2020. The unemployment rate has been revised down throughout the projection horizon as new data continues to point towards lower unemployment levels than previously envisaged.

Annual inflation, based on the Harmonised Index of Consumer Prices, is projected to trend up to 1.9% by 2020, reflecting a pick-up in domestic cost pressures.

In terms of public finances, forecasts for the general government balance have been revised upwards, partly reflecting a better than expected outturn in 2017.

Government finances are expected to remain in surplus over the coming years. Meanwhile the debt-to-GDP ratio is projected to fall to around 40% by the end of the projection horizon.

More details on the bank’s latest projections can be found at https://www.centralbankmalta.org/en/economic-projections