In a report published by the European Commission on Wednesday, Malta’s economy topped the expected growth amongst EU countries during the year, with a projected growth of 5.3%, compared to the 1.2% average in the euro area.
Current European Commission Vice-President Valdis Dombrovskis, said that “All EU economies are still set to grow this year and next, even if the robust growth in Central and Eastern Europe contrasts with the slowdown in Germany and Italy.”
Italy and Germany are expected to have the lowest growth levels in the eurozone in 2019, with just 0.1% and 0.5% respectively.
However, a significant acceleration in growth is expected by the European Commission for Germany, as the country’s growth is expected to increase to 1.4% in 2020, falling just below the expected eurozone average of 2020 of 1.6%.
Malta experienced the fifth year of successive growth of over 5%, with the European Commission remarking that Malta’s economy grew by 6.7% in 2018. The main factor behind this sustained success is the major shift to a booming, internationally-oriented services sector.
Domestic demand was seen as the main growth driver in 2018, particularly a strong and consistent growth in employment, which boosted household disposable income. This domestic demand replaced net exports as 2018’s main growth driver for Malta.
During the first quarter of 2019, this domestic demand was heavily supported by public consumption and investment, as private consumption growth decreased slightly. During the same period, net exports fell due to the massive growth in imports.
Whilst the momentum that current growth has is expected to remain consistent, the GDP growth is forecasted to lower down in 2019 and even further in 2020 to 5.3% and 4.8% respectively. This mainly comes as a result of the growth in private consumption gradually moving towards the average, thus imitating the speed of job creation.
After inflation reached 1.7% in 2018, it faced a period of limited activity, with there being little movement in the rate during the first months of 2019. However, inflation accelerated greatly in April, mainly due to rising food prices.
Furthermore, prices are anticipated to grow even more during the summer due to it being the peak tourism season and then to decelerate slightly once the season ends. The expected rates of inflation for 2019 and 2020 are 1.8% and 1.9% respectively.
Malta’s main sources of income, such as tourism, electronics, information technology services, iGaming and financial services, have thrived in recent years, and they are expected to continue doing so, with Malta’s economy having a solid base for future success.