Malta’s high GDP growth makes it one of the most dynamic economies in the EU, according to the European Economic Forecast for Winter 2019.
“Malta’s economy maintained a strong growth trajectory in 2018, with a particularly brisk expansion in the third quarter. Real GDP growth is estimated to have reached 6.2 per cent in 2018, making Malta one of the most dynamic economies in the EU,” the report said.
The report said that starting from the second quarter of 2018, domestic demand had replaced net exports as the main driver of growth.
“Private consumption has been buoyant, reflecting strong employment growth, increasing disposable income and a large accumulation of savings in recent years.”
“Investment remained subdued in the first three quarters of 2018, especially in non-residential construction and transport. Export growth slowed down from the high rates registered in recent years due to a weaker external environment and a drop in goods exports, while imports have started to recover, supported by strong domestic demand.”
The report said that growth is expected to continue over the forecast horizon, albeit at a slower pace.
“In 2019 and 2020, real GDP growth is set to ease to 5.2 per cent and 4.6 per cent, respectively. As global demand moderates, economic growth is expected to continue relying on domestic demand, underpinned by high private and public consumption.”
“Investment growth is expected to pick up on the back of large-scale infrastructure projects in the health, tourism and real estate sectors. The current account surplus is projected to remain large, reflecting the significant trade surplus of the internationally-oriented services sector.”
“Consumer price inflation began to accelerate in the second quarter of 2018 and reached 1.7 per cent by the end of the year. In part, the acceleration reflects the statistical impact of the increase in the weight of accommodation services in the price index basket for 2018. Despite tighter labour market conditions, wage pressures have yet to fully materialise. As wage growth starts gaining pace, inflation should gradually rise to 1.9 per cent in 2020.”
Commenting on the results, Minister for Finance Edward Scicluna stated: “I am impressed by the European Commission’s forecast which, has once again, revised upwards its forecast for our economy against a weaker external environment. The Commission has downgraded the Eurozone’s economic forecast amid Brexit and trade tensions.”