The Central Bank of Malta (CBM) has stated that the net export contribution to growth is expected to be negative in 2019 and 2020, reflecting a weak international environment.
A pick-up in import growth on the other hand is a result of strong domestic demand. The contribution of net exports should turn positive in 2021, reflecting faster export growth.
Delay in investment project decreases GDP growth projection
Compared with the Central Bank’s previous projections, Gross Domestic Product (GDP) growth has been revised marginally downwards in 2019, due to a delay in a major investment project in the private sector.
The Central Bank said that it is expecting economic growth over the coming years to remain strong, averaging 4.4% between 2019 and 2021.
Growth in private consumption and government expenditure is expected to remain robust, while investment is expected to recover from the contraction recorded in 2018.
Labour market to remain tight
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 in 2019, before edging up to 1.9% by 2021, reflecting a pick-up in services and non-energy industrial goods inflation (NEIG).
Moreover, the government balance is expected to remain in surplus over the coming years, such that the debt-to-GDP ratio is projected to decline to below 40% by 2021. Looking ahead, the external environment poses downside risks to the projections of economic activity and inflation.