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November 16 2024 08:52:05 by PCLMedia
 
The European Commission has revised its 2024 economic forecast for Malta, projecting real GDP growth of 5%, up by 0.4 percentage points from its spring estimate. This positions Malta as the EU’s fastest-growing economy, surpassing the 3.6% forecast for Cyprus and the EU average of just 0.9% (0.8% for the Eurozone).

Drivers of Growth The robust performance is driven by strong domestic demand and a positive contribution from net exports, bolstered by rising tourism and immigration. Tourism arrivals in Malta have exceeded pre-pandemic levels, with a 21.1% increase in visitors between January and August 2024 compared to the same period in 2023. Tourism expenditure has grown similarly, while other key sectors such as IT, finance, and recreation have also contributed to the export-driven growth.

Prime Minister Robert Abela hailed the Commission’s forecast, highlighting that Malta’s projected economic growth is more than five times the European average.

Sustained Momentum The growth trajectory is expected to continue, with GDP expansion projected at 4.3% in both 2025 and 2026. These figures keep Malta at the top of EU rankings, followed by Ireland (4%), Poland (3.6%), and Croatia (3.3%).

Investment is also recovering, with growth expected to reach 4.4% in 2024, 4.5% in 2025, and 3.5% in 2026. The ongoing absorption of EU Recovery and Resilience Fund support is expected to fuel further investments.

Employment and Wages Employment growth is forecast at 4.3% in 2024, supported by high immigration flows amid intense labor and skills shortages. However, the rate is expected to moderate to 3.1% in 2025 and 2.8% in 2026. The unemployment rate is set to remain low, dropping from 3.2% in 2024 to 3% by 2026.

Wage growth is predicted to stay modest, just above inflation, as many new jobs will be in low-paying sectors.

Fiscal Health and Inflation Malta’s government deficit is projected to narrow to 4% of GDP in 2024, down from 4.5% in 2023, aided by reduced subsidy spending and the restructuring costs of the national airline. The deficit is expected to decline further to 3.5% in 2025 and 3.1% in 2026, though it will remain above the EU’s 3% threshold.

The debt-to-GDP ratio is forecast to rise slightly to 49.8% in 2024 before stabilizing just above 50% by 2026, supported by smaller primary deficits and improved tax administration.

Inflation has moderated, with the Harmonised Index of Consumer Prices (HICP) averaging 2.5% in 2024. Energy prices are expected to remain stable through 2026, with inflation dropping to 2.2% in 2025 and 2% in 2026, led by food and services price trends.

EU Context Malta’s economic performance stands out in an otherwise subdued EU growth environment. While the EU is expected to see slight GDP improvements in 2025 and 2026, reaching 1.3% and 1.5% respectively, Malta remains a growth leader thanks to its resilient tourism sector, strong domestic demand, and export momentum.

This sustained growth underscores Malta’s ability to leverage its strategic strengths in key sectors, even as other EU economies struggle with sluggish expansion rates.
 

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