Malta’s economy to remain resilient in 2025, bolstered by consumption and services exports – report

Malta’s economy is set to maintain robust growth over the coming two years, underpinned by strong domestic demand and buoyant services exports, according to the European Commission’s Spring 2025 Economic Forecast published on Monday (today).

Following an impressive six per cent expansion in 2024 – one percentage point higher than previously anticipated – real GDP growth is projected to moderate slightly to 4.1 per cent in 2025 and four per cent in 2026. The main drivers behind this sustained growth include resilient private and public consumption, as well as a continued positive contribution from net exports, particularly in tourism, IT, financial and professional services.

Tourism and services continue to lift exports

In 2024, tourist expenditure rose by 23.1 per cent compared to the previous year, reinforcing the sector’s strong recovery beyond pre-pandemic levels. Other service-based industries such as recreational, professional, and information technology services also reported notable expansions.

Thanks to this export performance, combined with slowing inflation and wage growth outpacing price increases, household consumption surged by 5.7 per cent, while Government consumption rose by 7.3 per cent – giving a substantial lift to GDP.

Looking ahead, private consumption is expected to continue growing steadily – by 4.1 per cent in 2025 and 3.9 per cent in 2026 – maintaining its role as the key contributor to economic expansion. Investment, which rebounded by 2.4 per cent in 2024 after a dip the previous year, is forecast to increase by 2.5 per cent in 2025 and 2.1 per cent in 2026, albeit at below-average rates.

Labour market remains tight

Malta’s labour market showed continued resilience, with employment increasing by 5.1 per cent in 2024, driven by sustained immigration to address domestic labour shortages. Growth in employment is projected to stabilise, reaching 3.1 per cent in 2025 and 2.8 per cent in 2026.

The unemployment rate is set to remain at a historically low 3.1 per cent through both years. In this context, nominal wages per employee are forecast to rise by 4.1 per cent in 2025 and 3.5 per cent in 2026 – outpacing inflation and supporting real income gains.

Inflation continues downward trend

Headline inflation declined to 2.4 per cent in 2024 and is expected to ease further to 2.2 per cent in 2025 and 2.1 per cent in 2026. This moderation is attributed largely to stable energy prices, as authorities maintain subsidies pegged to 2020 levels, alongside a softening of imported price pressures.

Food and services are expected to remain the main sources of inflation over the coming years.

Deficit narrowing and debt stable

The general Government deficit narrowed to 3.7 per cent of GDP in 2024, from 4.7 per cent the previous year, supported by stronger tax revenue and one-off transactions. These gains were partially offset by increased public spending, particularly on the national airline and other current expenditures.

Looking ahead, the deficit is forecast to decline to 3.2 per cent in 2025 and further to 2.8 per cent in 2026. This downward trajectory is driven by reduced capital expenditure, stable energy subsidies (declining as a share of GDP), and a slight drop in social expenditure.

Despite the Government’s ongoing reforms to income tax brackets, the public debt-to-GDP ratio is expected to remain stable below 48 per cent over the forecast horizon.

The Commission’s outlook positions Malta among the stronger performers in the EU, supported by its relatively limited exposure to global goods trade shocks and continued strength in its services sector. With solid fundamentals, a tight labour market, and easing inflation, Malta’s economic trajectory appears on a steady path of sustainable growth through 2026.