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06/02/2020

Central Bank of Malta Quarterly Review – First Issue 2020

The Central Bank of Malta has published the first issue of its Quarterly Review for 2020, which analyses economic and financial developments in Malta and abroad during the third quarter of 2019.

The Review notes that the pace of growth of economic activity decelerated somewhat in the third quarter of 2019, with real gross domestic product (GDP) rising by 3.4% on an annual basis, following a 4.9% increase in the previous quarter. This was underpinned by weaker growth in domestic demand and a larger negative contribution from changes in inventories. By contrast, the contribution of net exports strengthened.

Notwithstanding the recent moderation, GDP growth in Malta for the first nine months of 2019 remained above its long-term average of around 4.0% and was more than three times that recorded in the euro area.

Labour market conditions remained favourable in the third quarter of 2019, as employment continued to grow while the unemployment rate fell further. According to the Labour Force Survey, the unemployment rate stood at 3.4%, lower than the rate of 3.6% recorded a year earlier and unchanged from the second quarter of 2019. Hence, unemployment in Malta remained less than half the average rate of 7.3% for the euro area and below the Bank’s structural measure of 4.0%.

Annual inflation as measured by the Harmonised Index of Consumer Prices (HICP) decelerated to 1.6% in September from 1.8% in June, largely driven by slower growth in food prices. Core inflation, which excludes the most volatile components of the HICP, stood at 1.4% in September. Meanwhile, annual inflation based on the Retail Price Index (RPI), which only takes into account expenditure by Maltese residents, eased to 1.4%.

With regard to public finances, the general government surplus narrowed when compared with the corresponding period a year earlier. This reflects a substantial increase in primary expenditure as well as a slight decline in revenue. When measured as a four-quarter moving sum, the general government surplus narrowed to 0.8% of GDP from 1.2% in the second quarter of 2019. During the third quarter of 2019, general government debt as a share of GDP fell to 43.1%. However, the Government’s net financial worth as a share of GDP declined, as the fall in financial assets was stronger than the decline in the stock of financial liabilities.

The Review presents an overview of the monetary policy decisions taken by the Governing Council of the European Central Bank (ECB). During the third quarter of 2019, the Council stepped up its accommodative monetary policy stance by primarily reducing further the deposit facility rate and announcing the re-start of the asset purchase programme.

It also carries an analysis of the saving behaviour of various types of households in Malta and summarises a study on the link between the European Commission business and consumer surveys and trends in macroeconomic data. Furthermore, the Review describes the liquidity conditions in the Maltese banking system and monetary policy operations conducted by the Central Bank of Malta.

The first issue of the Quarterly Review for 2020 is available on the website of the Central Bank of Malta.

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