Economic growth to slow down to 3.7% this year

Malta’s economy is expected to grow by a moderate 3.7% this year from just above 7% in 2022, the Central Bank is forecasting.

GDP growth projections were revised downward by the CBM in its latest outlook for the Maltese economy published on Thursday.

The CBM is also forecasting GDP growth to edge down to 3.6% by 2025.

In 2023, net exports are expected to be the main contributor to GDP growth. On the flipside, domestic demand is expected to grow at a slower pace when compared to 2022, which had been characterised by extraordinary investments.

The CBM said that from 2024, domestic demand is expected to be the main driver of growth.

The forecast projects moderate employment growth over the period, while wages are expected to pick-up due to relatively high inflation and a tight labour market.

The CBM said annual inflation based on the Harmonised Index of Consumer Prices (HICP) is projected to stand at 5.9% this year, only marginally lower from 6.1% in 2022.

Inflation is foreseen to remain elevated due to lingering indirect effects through the response of wages to recent increases in input costs and profit margins.

The general government deficit is set to decline throughout the projection horizon, while the Malta’s debt-to-GDP ratio is set to edge up and reach 54.7% by 2025.

On the fiscal side, the CBM sees deficit-increasing risks in 2023 from additional support measures related to Air Malta and higher than expected outlays on electricity distribution and compensation for blackouts.