Malta set to lead EU in economic growth and employment through 2026

Malta is expected to remain the fastest-growing economy in the European Union through 2025 and 2026, according to the European Commission’s Spring Economic Forecast published on Monday.

The report projects Malta’s GDP will grow by 4.1% in 2025 and 4.0% in 2026,  maintaining the strong momentum seen in 2024, when the economy expanded by 6%.

Driven by robust private and public consumption as well as positive net exports, particularly from tourism and financial services, Malta’s economy has outperformed previous expectations. The Commission noted that private consumption grew by 5.7% in 2024, while government consumption surged by 7.3%, offering a substantial boost to GDP.

Malta is also forecast to maintain the EU’s lowest unemployment rate, which is set to remain at 3.1% in both 2025 and 2026. Employment grew by 5.1% last year, supported by strong inward migration to fill labour shortages, although the pace of growth is expected to ease to more sustainable levels of 3.1% and 2.8% over the next two years.

Inflation is predicted to slow further, while nominal wages are expected to continue growing by 4.1% in 2025 and 3.5% in 2026, outpacing inflation and supporting household purchasing power.

On the fiscal side, Malta’s government deficit is forecast to decrease to 3.2% of GDP in 2025 and fall below the EU’s 3.0% threshold in 2026, reaching 2.8%. This improvement is attributed to a reduction in capital expenditure, notably the phasing out of costs related to the national airline, and a drop in subsidies as a share of GDP.

At the same time, revenues from personal income tax are expected to fall slightly due to a reform of income brackets.

The country’s debt-to-GDP ratio is projected to remain stable below 48% through 2026, among the lowest in the EU.