PwC Malta releases Economic Outlook for 2024 giving an insight in Malta’s economic growth and inflationary pressures

PwC Malta has released its Economic Outlook for 2024, providing insights into global economic trends and projections for the coming fiscal years. The report highlights a forecasted slowdown in global growth for FY24, with a marginal pick-up anticipated in FY25.

Key findings from the report indicate a decline in GDP growth rates across major economies such as the United States, Japan, Italy and France. The euro area is expected to maintain relatively flat growth in FY24 followed by a modest increase to 1.5% projected for FY25, as interest rates begin to decline.

Despite this overall trend, Malta continues to demonstrate robust economic growth, with a projected GDP growth of 4.4% in FY24, decelerating from 5.6% of the previous fiscal year. However, Malta’s growth trajectory is expected to align more closely with the average growth of the euro area in the near future.

In Malta, domestic consumption is the largest contributor to GDP, and outperformed headline economic growth in FY22 and FY23, following weaker years in FY20-FY21. However, the report highlights how, when accounting for inflation and population growth, real consumption per capita remains more or less flat compared with 2019.

Furthermore, inflation remains a significant concern, both globally and within Malta. While inflation is anticipated to decrease in the European Union and globally in 2024, Malta’s inflation rate is expected to remain above the EU average, driven primarily by food and service price inflation.

The report attributes Malta’s inflationary pressures in 2023 predominantly to increases in food and non-alcoholic beverage prices, as well as service-related expenses.

In response to these challenges, the Government of

Malta has introduced the Stabbiltà fil-Prezzijiet scheme, aimed at reducing retail recommended prices for approximately 400 food products. PwC Malta’s analysis maps these food types onto the official food sub-categories as specified by Eurostat, and also accounts for the fact that the selected products, which feature in the scheme, represent only a portion of those brands which are available to consumers.

When accounting for this, the analysis suggests that the scheme could potentially lead to a downward contribution to inflation in 2024 amounting to around 0.31 percentage points if implemented for the full year.

Finally, the report highlights how preliminary data for the first few months of 2024 indicate a decline in economic sentiment in some sectors, aligning with forecasts of a slowdown in GDP growth.

Furthermore, while inflation has continued to moderate in the first two months of the year, it remains above the euro area average and has some way to go before reaching a more stabilised level.