Economy healthy as sentiment remains above average, Central Bank says Quarterly review looks at economic indicators during first quarter of 2018

Malta’s economy continues to grow at a healthy rate fuelled by net exports, although the pace of growth has moderated and the local labour market remains tight, the Central Bank has said.

In its quarterly review of the domestic economy, the Central Bank said economic conditions remained above-average in the first quarter of the year, while price pressures were moderate. Public finances remained in the black, with a general government deficit registered in the first quarter of 2018 – the first in two years - down to one-off expenditure.

The Central Bank’s conclusions in its quarterly review include:

• Economic growth is being driven by net exports, while domestic demand tightened;

• Potential output moderated from 5.15% in the last quarter of 2017 to 4.5% in the first quarter of the year;

• Economic sentiment remains well above average and higher than the average across the eurozone;

• Industrial production fell in the first quarter of the year for the first time since the end of 2016, with manufacturing and quarrying both registering sharp declines;

• Employment rose and unemployment fell when compared to last year, even though the labour supply grew through higher labour market participation and more foreign workers;

• Annual inflation remained unchanged at 1.3%;

• Labour costs rose, though the rate of change remains moderate from a historic perspective, and Malta’s competitiveness deteriorated due to unfavourable exchange rates and relative price movements;

• Malta’s strong balance of payments position reflects structural, rather than cyclical, developments;

• Growth in mortgage loans to households remained strong, while growth in loans to non-financial corporations showed the first signs of recovery after a long decline.