Malta's economy maintained its strong growth momentum, with real GDP expanding by 4.0% in 2025. The expansion is driven by robust domestic consumption and a thriving tourism sector, and is projected to moderate to 3.7% in 2026 and 3.6% in 2027 as external economic conditions become less favourable. Although the impact of higher international energy prices is mitigated by government measures, inflation is nonetheless expected to accelerate to 2.7% in 2026. The labour market remains tight, with real wages growing moderately. Having narrowed to 2.2% of GDP in 2025, the government deficit is forecast to remain below the 3% threshold over the forecast horizon. The debt-to-GDP ratio is expected to stabilise at around 46%.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 4.0 | 3.7 | 3.6 |
| Inflation (%, yoy) | 2.4 | 2.7 | 2.3 |
| Unemployment (%) | 3.1 | 3.0 | 3.1 |
| General government balance (% of GDP) | -2.2 | -2.2 | -2.1 |
| Gross public debt (% of GDP) | 46.4 | 46.2 | 46.2 |
| Current account balance (% of GDP) | 8.3 | 6.3 | 6.1 |
Growth expectations are positive despite increasing uncertainty
Following a 4.0% expansion in 2025, real GDP is expected to grow by 3.7% in 2026, despite heightened economic uncertainty. This growth is driven by robust private and public consumption, and is further underpinned by a solid performance in key export sectors.
Malta’s robust economic performance is rooted in its strong services sectors, such as recreational, professional, IT, and financial services. The contribution of net exports to growth is positive, resulting from large net positive services trade outweighing the negative balance of trade in goods. The growth of the tourism sector outperformed expectations in 2025 and is expected to maintain momentum in 2026, despite the increased geopolitical uncertainty.
As real wages are forecast to continue increasing, private consumption is set to grow by 3.3% in 2026 and 3.5% in 2027. After a strong increase by 5.9% in 2025, government consumption growth is expected to slow down to 4.6% in 2026 and 3.9% in 2027, still providing a notable contribution to GDP growth. After a small contraction in 2025, investment is expected to return to growth by 2.0% in 2026 and 4.0% in 2027 on account of stronger public investment.
Real GDP growth is forecast to slow somewhat to 3.6% in 2027, reflecting expectations of more pronounced effects of labour shortages and an expected slowdown in external demand.
Employment growth continues, however labour shortages do not subside
Employment grew by 3.9% in 2025, underpinned by inflows of foreign workers. This, however, did not lead to decreasing labour shortages, as vacancy rates continued to increase. Employment growth is expected to slow to 3.2% in 2026 and 3.1% in 2027 in line with the moderation in economic activity. The unemployment rate is expected to remain very low at 3.0%. After the majority of collective wage agreements in the public sector were finalised, the nominal wage growth per employee averaged 4.2% in 2025 and is forecast to moderate to 3.5% in 2026 and 2.1% in 2027.
Inflation will increase following the global trends
Inflation is expected to pick up to 2.7% in 2026 after reaching 2.4% in 2025, as the international energy prices shock indirectly drives up transport, food and services inflation. The direct effect on local energy inflation of global energy prices increases is neutralised by the measures of the Maltese authorities to keep retail energy prices unchanged.
The government deficit ratio is expected to remain below 3%
In 2025, the general government deficit fell to 2.2% of GDP from 3.4% in 2024. This was due to strong government revenue growth, driven by nominal GDP growth and significant tax windfalls. Government expenditure continued to increase significantly, with substantial increases in the government’s wage bill and intermediate consumption, as well as a one-off expenditure arising from a court decision.
In 2026, the government deficit is forecast to remain stable at 2.2% of GDP. Weaker growth in income tax intakes is foreseen due to the reduction in personal income tax rates. Government expenditure is expected to continue increasing significantly in 2026, including as a result of the higher cost of energy subsidies.
The deficit is set to fall to 2.1% of GDP in 2027, as public sector wage growth is expected to moderate while subsidies and intermediate consumption as a share of GDP are also expected to decrease.
The public debt-to-GDP ratio is expected to broadly stabilise at around 46% over the forecast horizon.