Economic growth to slow down to 4.1%, Central Bank projects

Malta’s GDP growth is expected to gradually slow down in the next three years, the Central Bank has forecast.

In its annual report for 2016, the Central Bank predicted that GDP will grow by some 4.1% this year, down from 4.3% in 2016 and 6.2% in 2015. It is predicted to keep slowing down to 3.7% in 2018 and 3.3% in 2019.

“Over the projection horizon as a whole, GDP growth is expected to be driven mainly by domestic demand. The contributions of domestic demand and net exports are heavily influenced by the path of investment, which is set to expand in 2016 and 2017, contract in 2018, and recover in the outer year,” the report reads.

“As a result, while domestic demand is expected to drive economic growth in the first two years of the projection horizon, its contribution is set to be marginal in 2018, before rising again in 2019. In contrast, net exports are forecast to contribute negatively in the first two years, but positively in 2018 and, to a lesser extent in 2019.”

Private consumption expenditure is also expected to grow at a smaller rate – from 4.3% in 2016 to 3.6% in 2017, 3.2% in 2018 and 2.8% in 2019.

On the other hand, the rate of government consumption expenditure is expected to shoot up – from 3.1% in 2016 to 6.2% this year, before dipping again to 5.6% in 2018 and 3.7% in 2019.

The Central Bank report also noted that bank deposits belonging to residents of Malta rose by €1.1 billion (6.7%) when compared with the previous year, following a 12.9% increase in the previous year. Households were the main driver behind the increase in total deposits, accounting for over 60% of the overall increase, with non-bank financial institutions accounting for most of the remaining 40%.

The report also confirms that property prices continued to increase during the first three quarters of 2016 at an average annual rate of 5.2%, slightly faster than the 5% registered in 2015 as a whole.

‘Proof of Malta’s positive economic state’ – government

The government welcomed the Central Bank’s report, and drew parallels with Malta’s economic performance under the previous Nationalist administration.

It said that economic growth in 2016 was double that recorded in 2012 and triple that recorded in 2011. Private consumption increased by 3.8% when it had decreased by 0.4% in 2012, while household deposits increased by €3.5 million in the past four years.

“The Central Bank report is another positive certificate of our country’s strong economic performance, in contrast with neighbouring countries.”