Central bank forecasts ‘strong’ economic growth

(source: Unsplash/Sara Cardoso)

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The Central Bank of Malta expects economic growth to remain strong in the upcoming years, possibly averaging 4.4% between 2019 and 2021, according to a press statement the CMB recently published.

“Projections for economic activity have been revised upwards for 2019 reflecting stronger anticipated growth in private consumption, investment, and government expenditure,” the press statement says. Nevertheless, economic activity in 2020 has been revised marginally down, due to a downward revision in investment growth, the CBM adds.

The central bank expects GDP growth to be supported by domestic demand, reflecting robust growth in private consumption and investment, while the net export contribution to growth is expected to fall in the negative territory in 2019 and 2020. This latter reflects the weak international environment and a pick-up in import growth as a result of robust consumption and investment growth. However, the central bank expects this to return to the positive territory by 2021.

Strong but moderate job creation

“The pace of job creation is set to moderate, but remain strong. The labour market is expected to remain tight, with the unemployment rate projected at 3.8% by 2021. Annual inflation, based on the Harmonised Index of Consumer Prices (HICP), is projected to ease slightly this year, before edging up to 1.9% by 2021, reflecting a pick-up in services and non-energy industrial goods inflation (NEIG),” the press statement by the financial institution says.

The CBM expects government finances to remain in surplus over the coming years, such that the debt-to-GDP ratio is projected to decline to below 40%. Looking ahead, the external environment poses downside risks to the projections of economic activity and inflation, according to the press statement.

Domestic risks are seen to remain largely positive in the medium-term, with the risks to public finances being broadly balanced, as possible slippages in the implementation of investment projects could be offset by higher current expenditure, the central bank concludes.