May 16, 2022
The Central Bank of Malta (Bank) expects Malta‘s gross domestic product (GDP) to grow by 6.0% in 2022, by 5.3% in 2023 and by 3.8% in 2024. Compared to the Bank’s earlier projections, the level of GDP is being revised upwards due to an estimated 1.2 percentage point higher growth in 2021. Pre-pandemic economic activity levels would thus have been attained earlier than projected in the Bank’s previous projections exercise. Consequently, the GDP growth rate for 2022 is being revised down by 0.5 percentage points. No substantial revisions have been made to the subsequent two years.
In 2022, domestic demand is expected to be the main driver of growth, reflecting strong growth in private and government consumption. In addition, net exports are projected to also contribute strongly this year, as exports accelerate, while imports are projected to grow at a slower pace. The slowdown in imports in turn mirrors the expected drop in investment in 2022, following exceptional outlays in certain sectors in 2021. In the following years, domestic demand is envisaged to continue leading the expansion in economic activity, reflecting especially a foreseen strong contribution from private consumption. At the same time, the contribution of net exports is projected to remain positive, reflecting the gradual normalisation of tourism activity and continued growth in foreign demand generally.
Employment growth is set to accelerate to 2.6% in 2022 in view of the continued growth in economic activity. It is then set to slow down in the following two years. The unemployment rate is set to stand at 3.5% by 2022 before returning to 3.6% in 2023 and 2024. At the same time, labour market tightness is expected to gradually moderate as net migration flows pick up over the projection horizon. This is expected to alleviate wage pressures.
Annual inflation based on the Harmonised Index of Consumer Prices is set to rise to 2.7% in 2022, up from 0.7% in 2021, largely reflecting the impact of import price pressures on all subcomponents of inflation except energy. Import price pressures are then envisaged to ease somewhat and hence, inflation is set to decelerate to 1.8% by 2024.
Source: The Central Bank of Malta
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