Malta’s GDP expected to grow by 3.8 per cent in 2024, ‘a more moderate pace’, says Central Bank

On Friday (today), the Central Bank of Malta announced that according to its latest forecasts, Malta’s gross domestic product (GDP) is expected to grow by 3.8 per cent in 2024.

Additionally, it reported that the GDP is expected to edge down to 3.6 per cent in 2025, and to 3.3 per cent by 2026.

“This implies an upward revision when compared to the Bank’s previous projections, while for 2025 the outlook is unchanged,” stated the bank.

The bank further explained that said forecasts do not incorporate the national accounts data published on 28th November by the National Statistics Office (NSO). It added that the strong upward revision in GDP growth made in that release means that “it is likely that the bank’s projections, especially those for 2023, will be revised further upwards in the next projection round.”

Expanding on its forecast, the Central Bank said that domestic demand is expected to be the main driver of growth, as private consumption growth continues to increase at “a brisk pace” and private investment begins to recover.

“Net exports are also projected to contribute positively, driven mainly by growth in services exports. Employment growth is set to moderate in the projection horizon, while wages are expected to pick-up in 2024, due to relatively high inflation and a tight labour market,” added the bank.

Annual inflation based on the Harmonised Index of Consumer Prices is projected to ease from 5.6 per cent in 2023, to three per cent in 2024, before reaching two per cent by 2026. “It is thus foreseen to remain above the Eurosystem price stability objective next year due to lingering indirect effects through the response of wages to recent increases in input costs and profit margins,” said the bank.

However, it stated, compared to previous projections, inflation has been revised down in line with recent data outturns.

The bank is expecting the general Government deficit to decline throughout the projection horizon. The general Government debt-to-GDP ratio is set to increase and reach 56.7 per cent by 2026.

When compared with the previous publication, the deficit and debt ratios were revised down in 2023, but up in the following two years.

Overall, risks to economic activity lean towards positive outcomes for 2023 and 2024, due to recent revisions in national accounts, as well as the outturn for the third quarter.

Risks to inflation are also tilted slightly to the upside in 2023 but are balanced thereafter.

“On the fiscal side, risks are on the upside (deficit-reducing) in 2023 due to the likelihood of stronger than expected growth in tax receipts. Risks are then set to tilt on the downside (deficit-increasing) from 2024, mainly reflecting the likelihood of higher than expected spending on energy support measures,” the bank explained.