Outlook for the Maltese Economy 2017-2020

The pace of economic activity in Malta has picked up in 2017.

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 an upward revision in growth when compared to the previous set of forecasts, reflecting a stronger expansion in private consumption and in net exports. 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, increased labour market participation and robust services exports are the primary drivers supporting the economic expansion.

As a result of fast economic growth, the labour market is projected to remain tight, with the unemployment rate falling further to 4.1% in 2017. The unemployment rate is expected to pick up somewhat subsequently, as the pace of activity moderates, although it is set to remain low from a historical perspective over the entire projection horizon.

Annual inflation, based on the Harmonised Index of Consumer Prices, should rise from 0.9% in 2016 to 1.2% in 2017, partly reflecting higher international fuel prices. It is projected to trend up further to 2% by 2020, reflecting a pick-up in domestic cost pressures.

In terms of public finances, the general government balance is expected to remain in surplus between 2017 and 2020. Meanwhile the debt-toGDP ratio is projected to fall to just above 45%.