Central Bank releases economic update for February

Economic activity in Malta continued to expand robustly in the third quarter of 2015, with real gross domestic product (GDP) increasing by 5.4% on a year earlier. Growth was driven by domestic demand.

Tourism indicators point to further expansion in the fourth quarter of 2015. Buoyant economic activity is being reflected in the labour market, with employment expanding and the unemployment rate remaining at historically low levels. Price pressures were moderate. The annual rate of inflation, based on the Harmonised Index of Consumer Prices (HICP), eased to 0.8% in January 2016.

Maltese residents’ deposits continued to expand at a rapid annual rate in December, while the annual rate of growth of credit to residents edged up to 5.2%. As regards fiscal developments, the general government deficit narrowed substantially in the third quarter of 2015, while the deficit on the Consolidated Fund also decreased during the first eleven months of the year. On the external side, the current account of the balance of payments remained in surplus in the third quarter of 2015. 

Output, demand and the labour market

Economic activity in Malta continued to grow strongly during the third quarter of 2015, with real GDP rising at an annual rate of 5.4%, following a revised growth rate of 5.8% in the previous quarter.

During the quarter under review, growth was driven by domestic demand, which rose by 9.1% on a year earlier. In turn, the main driver was a rise in gross fixed capital formation, which grew sharply when compared with the third quarter of 2014. Private consumption also had a positive impact. In contrast, government consumption fell. Overall, domestic demand contributed 7.5 percentage points to real GDP growth.

Gross fixed capital formation rose sharply for the second consecutive quarter. In the third quarter it increased by 39.7% on a year earlier. This mostly reflected higher spending on machinery and transport equipment. Spending on dwellings also increased. In contrast, non-residential investment declined, while the other components of investment, which include investment in software, were broadly stable.

Private consumption also went up, expanding at an annual rate of 5.1% in the third quarter, reflecting continued growth in compensation of employees. It added 2.6 percentage points to GDP growth. 

In contrast, following several quarters of strong growth, government consumption declined by 5.4% on the third quarter of 2014, lowering GDP growth by 0.9 percentage points. Although government wages and intermediate consumption increased, receipts from sales of government services, which are netted against such expenditure, rose even faster.

Exports rose by 3.4% year-on-year, mainly as a result of an increase in foreign sales of services. Meanwhile, reflecting strong growth in aggregate demand, imports rose by 5.3%, supported by goods imports in particular. With imports growing faster than exports, net exports declined, dampening GDP growth by 2.1 percentage points. 

For the complete economic update, download the file below.