A real decrease of 7.4% in GDP is expected this year, Finance Minister Edward Scicluna announced in Parliament during his Budget 2021 speech. However, this decline is expected to begin to recover next year as the Maltese economy is expected to register a growth of 5% in real terms and 6.4% in nominal terms.
This growth is to be generated by a growth in investment of 7.5% and growth in private consumption, which is expected to be that of 3.7%.
Exports are also expected to contribute for growth with an increase of 5.5% while imports are expected to grow at a rate of less than 4.5%. On the other hand, public consumption is expected to decrease by 1.2%.
With this projected growth, next year is expected to have a 2.3% increase in employment, while the unemployment level is expected to remain relatively low at a rate of 4%. Inflation is expected to be at 1.3%.
In terms of public finances for 2021, the deficit should drop to 5.9% of GDP while debt rises to 58.6% of GDP.
Economic and Financial Situation
Although Malta experienced a fall in GDP (7.7%) in the first half of the year, this was less than that of the Eurozone (9%).
Measures such as COVID-19 Wage Supplement, deferral payment of taxes, refund of electricity bills and the grant for rent costs, among others, were instrumental in protecting the income of workers, as in the first half of this year, wages and salaries increased by 5.8 %, which translated into an increase of about one hundred and sixty-four million euro (€164m).
Unemployment rates (4.1 %) were among the lowest in in August when compared to the average in the Eurozone (8.1 %).
All this reflected the fact that although tourism-related sectors such as retail, catering, accommodation and transport recorded substantial reductions, sectors such as information and including communication, arts, entertainment and recreation in which gaming and real estate recorded increases in Value Added Gross.
Inflation as measured by the HICP fell to 0.5% in September, while inflation measured by the RPI, dropped to 0.18%.
Mata is expected to register a deficit of 9.4% of GDP. Debt, which in the first quarter of this year was 44.4% of GDP, is expected to rise to 55%.