News - News Releases 2017


Central Bank of Malta Quarterly Review – Fourth Issue 2017

The Central Bank of Malta has published the fourth issue of its Quarterly Review for 2017, which analyses economic and financial developments in Malta and abroad during the second quarter of 2017.

The Review also includes an article on the financing of companies in Malta as well as a study on the relationship between credit and economic activity. Another article analyses the correlation between Maltese and euro area government bond yields.

Economic activity in Malta during the second quarter of 2017 remained robust, with real gross domestic product (GDP) rising by 6.4% on an annual basis, more than three times the rate registered for the euro area as a whole. Growth was driven by net exports, as domestic demand decreased in annual terms, mainly on account of a drop in investment, which was exceptionally high a year earlier.

The labour market remained favourable, with employment rising further and unemployment reaching an all-time low of 4.1%.

The annual rate of inflation, measured by the Harmonised Index of Consumer Prices (HICP), eased during the period under review, standing at 1.0% in June, down from 1.2% three months earlier. HICP inflation remained below that in the euro area, which stood at 1.3% in June.

Monetary dynamics remained robust during the second quarter of 2017. Residents' deposits with monetary financial institutions (MFIs) operating in Malta continued to grow steadily in annual terms, while the shift to overnight deposits persisted. At the same time, credit to residents of Malta eased, mainly driven by developments in credit to general government and loans to non-financial corporations (NFCs).

As regards fiscal developments, in the second quarter of 2017 the general government surplus declined when compared with the same period in the previous year, as expenditure rose at a faster pace than revenue. When measured on the basis of a four-quarter moving sum, general government recorded a surplus of 2.0% of GDP, slightly lower than the 2.3% in the previous quarter. General government debt, as a share of GDP, stood at 56.8% at the end of June 2017.

The Review presents an overview of the monetary policy decisions taken by the Governing Council of the European Central Bank (ECB). During the quarter under review, the Council maintained its accommodative monetary policy stance during the period under review. It confirmed that the ECB's key interest rates will remain low for an extended period of time and that its asset purchase programme (APP) is intended to continue until at least the end of December 2017. The Governing Council also recalled that net purchases will be made alongside reinvestments of principal payments from maturing securities purchased under the programme.

Following the cut-off date of the Quarterly Review, the Governing Council announced that key ECB interest rates will remain at their present levels for an extended period of time and well past the horizon of net asset purchases. The Council also decided that, from January 2018, purchases under the APP will be at a monthly pace of €30 billion. Such purchases will continue until at least the end of September 2018, although the Council stands ready to increase the APP in terms of size and/or duration, if necessary. The Council also stated that the reinvestment of principal payments from maturing securities will continue for an extended period of time after the end of net asset purchases, and in any case for as long as required.

 The fourth issue of the Quarterly Review for 2017 is available on the website of the Central Bank of Malta.

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