Malta’s real GDP is forecast to increase by 5.4 per cent in 2018 and 5 per cent in 2019, according to the European Commission’s Summer 2018 Economic Forecast for Malta.
The report noted how real GDP rose by 6.4 per cent in 2017, one of the highest growth rates within the EU, driven by net exports, which reflected sustained export growth combined with a contraction in imports. It said that growth is set to remain robust but to moderate over the forecast horizon.
The report also observed that domestic demand had been affected by a sharp decline in investment, owing to strong base effects from exceptional investment growth in previous years. “The solid performance of the internationally-oriented services sector contributed to maintain Malta’s sizeable current account surplus,” the report stated.
“Domestic demand is set to become the main driver of growth in the second half of 2018, underpinned by an expansion in public and private consumption. Investment is expected to recover strongly in 2019, supported by projects in the health, technology and telecoms sectors. The robust growth rate of residential investment is set to moderate in line with the expected slowdown in population growth.”
“The economic momentum is expected to further support employment creation, on the back of record-low unemployment and increasing labour supply (resulting from the inflows of foreign workers and the rising participation of women in the labour market).”
The downside risks that the report remarked on were “mainly related to geopolitical uncertainties, which could be particularly relevant for Malta’s small and open economy, and the possibility of a slower-than-expected recovery in investment.”
The report concluded by stating that regulated prices in the electricity market and moderate wage dynamics have helped keep inflation slightly below the euro area average. “Headline annual HICP inflation is forecast to gradually pick up over the forecast horizon to reach 1.8 per cent in 2019, driven by price pressures in the services component.”