While Malta’s economic growth may have settled down from the exceptional levels of 2014 and 2015, it is expected to remain well above the EU average, according to the European Commission’s winter forecasts.
The forecasts said that economic expansion is forecast to continue at a broadly unchanged pace in 2017 and 2018. Unemployment is set to remain at record lows while favourable labour market developments will help private consumption to continue growing robustly. Skills shortages are expected to put pressure on wage growth.
Fiscal policy is set to remain accommodative, while improving financing conditions are set to contribute to the recovery in investment. Consumer price inflation, which moderated in 2016, is projected to pick up discreetly over the forecast horizon but to remain below the long term average.
However, the budget deficit is only expected to improve marginally, as growing tax revenues are largely offset by rising expenditure. The current-account is forecast to stabilise at a surplus of over 5 per cent of GDP.
The forecasts warned that Malta's high trade openness could expose it disproportionately to shocks from global trade, while the successful launching of the Malta Development Bank could lead to more dynamic investment in the medium term.