Social and Economic Development in Malta in the Context of the European Economic Landscape

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1 Social and Economic Development in Malta in the Context of the European Economic Landscape Economic Overview for the European Economic and Social Committee DR GORDON CORDINA MARCH 2017

2 Sustainable Economic Growth The Maltese economy has shown remarkable resilience in the face of unstable external economic environment. Despite the slowdown in 2009 principally triggered by the global financial crisis, the economy rebounded in the following years, registering an average real economic growth rate equal to 2.4% between 2007 and This economic growth continued to increase, peaking in 2014 with a growth rate equal to 8.3%. In 2015, growth in Gross Domestic Product (GDP) amounted to 7.4%, the main impetus coming from strong private investment and consumption. In 2016, the economic expansion continued at a more moderate pace with real GDP growth estimated to have turned out at 5.0%. Between 2017 and 2018, the economy is forecast to continue growing. Projected annual real GDP growth rates for 2017 and 2018 are estimated at 3.7%.

A C E F G - I J K L M N O - Q R-U Agriculture, forestry and fishing Manufacturing Water supply; sewerage, waste management and Construction Wholesale and retail trade, transport, accomodation

3 A C E F G - I J K L M N O - Q R-U Agriculture, forestry and fishing Manufacturing Water supply; sewerage, waste management and Construction Wholesale and retail trade, transport, accomodation Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration, defence, education, human health and social work activities Arts, entertainment and recreation; other service activities; activities of household and extra-territorial organizations and bodies Growth in Gross Value Added by sectors in 2016 The highest growth in Gross Value Added was registered in the Administrative and support services activities sector.

4 Favourable Labour Market Developments Against the backdrop of buoyant economic activity, employment continued to rise. Employment expanded by an annual average rate of 3.6% over the period 2014 to 2017 as opposed to an annual average employment growth of 2.2% during the period 2009 to Despite the surge in the active population registered over the past years, the unemployment rate continued its downward trend. In 2016, the unemployed persons as a percentage of the total active population amounted to 4.8% as against 8.5% unemployment registered in the EU and 10% in the Euro Area. The unemployment rate is expected to remain broadly unchanged over the forecast horizon.

5 Inflation rate above the EU and EA averages Following the austerity measures undertaken in response to the European debt crisis, a prolonged period of low inflation characterised the EU region. The local economy is considered to have performed relatively better in terms of consumer price inflation. The inflation rate in Malta has exceeded EU and Euro Area averages in recent years but remained below the 2% optimal inflation rate target. In 2016, the annual average rate of change in the Harmonised Index of Consumer Prices (HICP) was equal to 0.9% in Malta, higher than that registered in the EU (0.3%) and the Euro Area (0.2%). Between 2009 and 2013, the annual average inflation rate in Malta exceeded the 2% target marginally to amount to 2.1%. The inflation rate declined over the next years but remained above EU and Euro Area averages. The EU Commission forecasts the inflation rate to increase to 1.6% in 2017 and to 1.8% in 2018.

Downward trend in Government Budget Deficit and Debt On the fiscal side, public finances have been registering marked improvements. The general government debt continued to narrow to stand at 59.

6 Downward trend in Government Budget Deficit and Debt On the fiscal side, public finances have been registering marked improvements. The general government debt continued to narrow to stand at 59.6% of GDP in It is estimated to have declined by 6 percentage points over the period 2007 to The European Commission forecasts a further reduction from 64.3% to 55.6% between 2014 to From 2008 to 2013, the deficit-to-gdp ratio was brought below -3% to amount to -2.6% in In 2016, it is estimated to amount to -0.7% and is expected to reach -0.6% by Fiscal policy is set to remain accommodative, while improving financing conditions are set to contribute to the recovery in investment.

Number of people at risk of poverty remains a challenge Malta s target is to reduce the number of people at risk of poverty and social exclusion by 6,560 by 2020.

7 Number of people at risk of poverty remains a challenge Malta s target is to reduce the number of people at risk of poverty and social exclusion by 6,560 by Yet, the number of people at risk of poverty has increased by 15,000 individuals from 2007 to 2015, mainly due to inward migration. The percentage of population at risk of poverty stood at 22.4% which is slightly lower than the rate of 23.7% registered for the EU28 in 2015.

8 Economic Overview for the European Economic and Social Committee (EESC) Thank you

Economic Projections For 2014 And 2015

Economic Projections For 2014 And 2015 Article published in the Quarterly Review 2014:3, pp. 77-81 7. ECONOMIC PROJECTIONS FOR 2014 AND 2015 Outlook for the Maltese economy 1 The Bank s latest macroeconomic