Despite GDP growth easing from 6.2% to 5.2% in 2019, the Maltese economy is still expected to top the EU’s growth chart
The Maltese economy is one of the most dynamic in the EU, having registered a growth in GDP of 6.2% in 2018, according to the European Commission’s winter economic forecast.
The country’s economy maintained a steady growth trajectory in 2018, adding that while GDP growth was expected to persist, it would ease to 5.2% in 2019 and 4.6% in 2020.
The commission noted that starting during the second quarter of 2018, domestic demand had replaced net exports as the main driver of economic growth.
“Private consumption has been buoyant, reflecting strong employment growth, increasing disposable income and a large accumulation of savings in recent years,” reads the report.
It added that investment remained subdued in the first three quarters of 2018, especially in non-residential construction and transport.
Moreover, export growth slowed down from the high rates registered 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 commission said. “The current account surplus is projected to remain large, reflecting the significant trade surplus of the internationally-oriented services sector.”
The Commission also noted that price inflation began to accelerate in the second quarter of 2018, reacting 1.7% 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 materialize. As wage starts gaining pace, inflation should gradually rise to 1.9% in 2020.”
Reacting to the forecast, the Finance Ministry noted that the commission expected investment growth to pick up this year, and that inflation is expected to remain below the 2% EU threshold for the next two years.
Finance Minister Edward Scicluna said he was impressed by the Commission’s forecast, which has once again, revised its forecast for the Maltese economy upwards against a weaker external environment.