Malta to register second highest economic growth next year, EU autumn forecast shows
EU autumn forecast sees only four member states with economies growing by more than 1% next year and Malta is one of them
![Malta's economy is expected to grow by 2.8% next year, the second highest in the EU](http://content.maltatoday.com.mt/ui/images/photos/dl_ewropej_skilled_workers.png)
Malta’s economic growth will be the second highest in the EU next year, according to the European Commission’s autumn forecast released today.
With GDP estimated at 2.8%, Malta is one of only four member states with a GDP forecast higher than 1% - the others being Ireland (3.2%), Romania (1.8%) and Bulgaria (1.1%).
Other member states will register GDP growth of 1% or less next year, while Germany, Latvia and Sweden will see their economies contract.
The Euro area and the EU are expected to grow by 0.3% respectively in 2023.
But in the short-term, the European Commission is expecting the EU and euro area to contract in the last quarter of this year and first quarter of 2023, amounting to a technical recession.
Malta is expected to end 2022 with GDP growth of 5.7%, slowing down next year on the back of weaker exports and a reduction in household purchasing power as a result of higher prices.
High deficit to persist
Malta’s deficit will decrease but still remain among the highest in the EU next year at 5.7%.
as government maintains hefty energy subsidies to cushion the inflationary impact.
These energy-related support measures are estimated to account for 2.9% of GDP in 2022 and are expected to further rise to 3.5% of GDP in 2023, before declining to 2.7% of GDP in 2024. As a result, the general government deficit is set to decrease only marginally in 2023 and more markedly to 4.4% in 2024.
The government debt-to-GDP ratio is set to increase to 57.4% in 2022 and gradually reach 60.6% in 2024, remaining within the environs of the 60% mark set by the Maastricht criteria.
The European Commission says labour shortages will remain a bottleneck going into 2023.
In the past two years, Malta managed to maintain strong employment growth by limiting the impact of the pandemic through fiscal support. Employment grew by 2.9% in 2021, with the wage support measures remaining largely in place. Employment is set to continue growing at a similar pace in 2022 and over the forecast horizon.
Malta’s unemployment rate is forecast to decline to 3.2% in 2022, and to further decrease to all-time lows in 2023 and 2024.
The European Commission says that despite government’s intervention to keep energy prices unchanged, inflation in 2022 is expected to rise to 6.1%. Inflation is particularly high in imported goods, particularly food, transport, hospitality and housing services. These factors will continue to drive price increases in 2023, with inflation expected at 4%. At the same time, wage growth is expected to remain moderate.
Prime Minister Robert Abela welcomed the forecast, tweeting that government policies “are making a real difference”.