The Maltese economy maintains its growth momentum on the back of strong domestic demand and export performance. Tourism arrivals to Malta continue to grow, while the strong employment and recovering real wages are supporting consumption. After achieving 5.0% GDP growth in 2024, the Maltese economy is set to continue expanding at 4.3% in 2025 and 2026. The government deficit is set to decline to 4.0% of GDP in 2024 and is expected to decrease further in 2025 and 2026, remaining above 3% over the forecast horizon.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 5,0 | 4,3 | 4,3 |
| Inflation (%, yoy) | 2,5 | 2,2 | 2,0 |
| Unemployment (%) | 3,2 | 3,1 | 3,0 |
| General government balance (% of GDP) | -4,0 | -3,5 | -3,1 |
| Gross public debt (% of GDP) | 49,8 | 50,4 | 50,2 |
| Current account balance (% of GDP) | 5,7 | 5,7 | 5,9 |
Growth is expected to remain strong
Real GDP growth in 2024 is projected to reach 5.0%, 0.4 pps. higher than expected in spring. The main drivers are strong private and public consumption, aided by the positive contribution of net exports. These trends reflect the impact of still growing tourist arrivals and robust immigration flows.
Tourism in Malta already exceeded the pre-pandemic levels in 2023 and continues to grow. Between January and August 2024, the flow of tourists was 21.1% higher than the corresponding period of 2023, matched by a similar overall tourism expenditures growth. Driven by tourism and other services sectors (recreational services, as well as professional, IT and financial services), exports are expected to continue growing faster than imports in 2024, with an overall positive contribution of trade to real GDP growth.
Investment growth is projected to recover after a sharp slowdown in 2023, reaching 4.4% in 2024, 4.5% in 2025, and 3.5% in 2026. The ongoing absorption of the Recovery and Resilience Fund’s support provides additional impulse to investments. Overall, real GDP is projected to stay on a robust growth path reaching 4.3% in both 2025 and 2026.
Employment continues on the path of robust growth
Employment is expected to grow by 4.3% in 2024, relying on high immigration flows given the intense labour and skills shortages on the domestic market. Employment growth is set to decelerate but remain strong at 3.1% in 2025 and at 2.8% in 2026. The unemployment rate is expected to stay low at 3.2% in 2024, marginally dropping to 3.0% by 2026. However, high employment growth in low-paid sectors is set to keep nominal wage growth per employee in 2024 and over the forecast horizon modest, growing at a pace slightly above projected inflation.
Inflation declines following the global trend
HICP inflation moderated and is set to average 2.5% in 2024. Energy prices are expected to remain stable also in 2025 and 2026, as Maltese authorities confirmed their commitment to continue their energy subsidies measures. Headline inflation is forecast at 2.2% in 2025 and 2.0% in 2026, with food and services inflation set to be the main contributors of inflation.
The government deficit is set to decline to just above 3% in 2026
In 2024, the general government deficit is set to fall to 4.0% of GDP, from 4.5% in 2023, due mainly to a decrease of subsidies, including measures to mitigate the impact of high energy prices, and the national airline's restructuring costs.
In 2025, the deficit is forecast to further decrease to 3.5% of GDP. In particular, subsidies are expected to further drop as percentage of GDP while the measures to mitigate the impact of high energy prices are expected to remain unchanged in nominal terms. Compensation of employees, social expenditure and public investment are also expected to decline somewhat as a share of GDP. This is projected to be partially compensated by decreasing revenues from personal income taxes, due to a comprehensive reform of income brackets.
Based on unchanged policies, the deficit is set to decline further to 3.1% of GDP in 2026 mainly reflecting a further decrease of subsidies as a share of GDP and the higher growth rate of revenues compared to the growth rate of nominal GDP, as the efforts to improve tax administration start to bring results
In 2023, the debt-to-GDP ratio fell by 2 pps. to 47.4%, despite the high primary deficit, due to strong nominal growth as well as the impact of the benchmark revision. A stock-flow adjustment related to the equity injection in the national airline and a less favourable interest-growth-rate differential are expected to drive the increase of the public debt to 49.8% of GDP in 2024. Smaller primary deficits are forecast to lead to a stabilisation of the debt ratio by 2026, just above 50% of GDP.