Growth for Malta marked downwards, blames gas supply

The Central Bank of Malta has once again revised downwards its projected gross domestic product growth by 0.2 percentage points to 5.2 percent for this year, according to an update to its outlook for the Maltese economy.

The central bank had already revised downwards its projected GDP growth in June.

In the report, the central bank said it expected the island’s GDP to grow by 4.5 percent in 2023, 0.4 percentage points lower than the previous projection, and 3.7 percent in 2024, 0.1 percentage points lower.

“The downward revisions reflect the strong pick-up in inflationary pressures as well as a further deterioration in the international economic environment due to the recent cuts in gas supplies to European countries,” the bank said in its report.

It said net exports were expected to be the main driver of growth this year, reflecting the correction in import-intensive investment outlays from the exceptionally high levels reached in 2021.

The contribution of domestic demand is expected to be positive but significantly lower compared to that of 2021, as growth in activity normalizes following the strong rebound last year.

In the following years, domestic demand is expected to lead the expansion in economic activity, especially from private consumption, it said, adding that the contribution of net exports is projected to ease over the projection horizon, reflecting the gradual normalization of tourism exports and decelerating growth in foreign demand more generally.

This year’s employment growth is expected to reach 3.5 percent, compared with 2.8 percent registered last year. It is set to moderate to just above 2 percent by 2024. On the other hand, the unemployment rate is projected to decline to 3.1 percent this year from 3.5 percent last year.

Annual inflation based on the Harmonised Index of Consumer Prices (HICP) is projected to pick up sharply in 2022 and remain high also in 2023, it said, adding that inflation is expected to accelerate to 5.9 percent this year from 0.7 percent in 2021.

“The sharp pick-up in inflation reflects a broad-based increase across all sub-components of HICP except for energy inflation. Import price pressures are expected to moderate somewhat by the beginning of next year, although these are envisaged to remain high by historical standards,” it said. ■