The Maltese economy continues to grow robustly driven by strong exports and domestic demand. Tourism flows bounced back to well above pre-pandemic levels and the strong inflow of workers is boosting domestic demand. After reaching 5.6% GDP growth in 2023, the Maltese economy is expected to achieve a growth rate of 4.6% in 2024 and 4.3% in 2025. The government deficit stood at 4.9% of GDP in 2023, and it is expected to only gradually decrease in 2024 and 2025. Thanks to robust nominal GDP growth, the public debt-to-GDP ratio is forecast to increase only slightly despite the still high primary deficit.
| Indicators | 2023 | 2024 | 2025 |
|---|---|---|---|
| GDP growth (%, yoy) | 5.6 | 4.6 | 4.3 |
| Inflation (%, yoy) | 5.6 | 2.8 | 2.3 |
| Unemployment (%) | 3.1 | 3.0 | 2.9 |
| General government balance (% of GDP) | -4.9 | -4.3 | -3.9 |
| Gross public debt (% of GDP) | 50.4 | 52.0 | 52.6 |
| Current account balance (% of GDP) | 4.2 | 3.4 | 3.6 |
Growth remains robust
In 2023, real GDP growth reached 5.6%, 1.6 pps. higher than projected in autumn. Both private consumption and exports came much stronger than expected, resulting from significantly higher immigration and tourism flows. Besides exceptionally strong immigration, Malta’s economy continues to benefit from a low pass-through of monetary policy to retail interest rates and from government measures that have kept energy prices stable at 2020 levels.
Tourism reached pre-pandemic levels in 2023. The number of tourist arrivals increased by more than 26% in the first two months of 2024, although tourism expenditure grew at a slightly slower pace. Strong growth is also forecast in exports of electronics and entertainment, professional and financial services.
Construction investment is expected to stabilise and recover moderately after a sharp fall in 2023, growing at 2.5% in 2024 and 3.9% in 2025. The increase of private consumption and activity in the service sector is expected to lead to higher imports of goods and services. Overall, the forecast for GDP growth was revised upward to 4.6% in 2024 and 4.3% in 2025.
Strong labour demand drives migration while real wage growth remains sluggish
With employment growth at 6.5% in 2023, Malta's labour market exceeded expectations. Employment growth is set to remain strong at 4% also in 2024 and 2025 as the country continues to attract foreign workers. Labour and skills shortages are still mentioned as the main limiting factors for the Maltese economy.
The unemployment rate was revised upwards from 2.9% to 3.5% in 2022 due to an updated demographic survey. In 2023, the unemployment rate fell to 3.1% and it is expected to drop marginally to 3% and 2.9% in 2024 and 2025. Nominal wages were, however, still growing at relatively weak rates in 2023 as employment expanded in the low wage sectors, resulting in negative real wage growth per head.
Inflation declines broadly in line
HICP inflation in 2023 reached 5.6% despite the government intervention to keep energy prices at 2020 levels. The Maltese authorities confirmed their commitment to limiting energy inflation in 2024 and 2025. Inflation in Malta slowed down in the first quarter of 2024 mainly due to lower services inflation. Headline inflation is forecast at 2.8% in 2024 and 2.3% in 2025, with food prices set to remain the fastest growing component.
The government deficit remains high
In 2023, the general government deficit fell to 4.9% of GDP, from 5.5% in 2022, due mainly to the decrease of subsidies, including measures to mitigate the impact of high energy prices, and of the national airline's restructuring costs.
In 2024, the deficit is forecast to further decrease to 4.3% of GDP. A contained growth of intermediate consumption expenditure and of the public wage bill are the main factors determining the reduction of the deficit. The phasing out of the national airline's restructuring costs is also expected to contribute to the deficit reduction. This is projected to be partially compensated by the increase in the net budgetary cost of measures to mitigate the impact of high energy prices to 2.0% of GDP in 2024, from 1.7% in 2023, related to the expansion of targeted income support and to the evolution of oil prices to which gas import prices are linked.
Based on unchanged policies, the deficit is set to decline further to 3.9% of GDP in 2025 mainly reflecting the expected reduction of measures to mitigate the impact of high energy prices (to 1% of GDP) driven by the reduction of targeted income support and the drop of oil prices.
In 2023, the debt-to-GDP ratio fell by 1.2 pps. to 50.4% due to strong nominal growth and despite the high primary deficit. A positive stock-flow adjustment related to the equity injection in the national airline is expected to drive the increase of the public debt to 52% of GDP in 2024. For 2025, a smaller primary deficit and a favourable interest growth differential will lead to a smaller increase of public debt to 52.6 % of GDP.