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21/04/2020

Outlook for the Maltese Economy 2020-2022

The Bank's latest economic projections were produced on the basis of information available until 28 February 2020, prior to the first case of COVID-19 in Malta.

At that point in time, the Central Bank of Malta expected economic growth over the coming years to moderate but remain strong. Growth was primarily expected to be supported by all components of domestic demand. Compared with the Bank's previous projections, published in December 2019, gross domestic product (GDP) growth was revised downwards in 2020. Similarly, the pace of job creation was expected to ease but remain strong from a historical perspective. Meanwhile, annual inflation, based on the Harmonised Index of Consumer Prices (HICP), was projected to pick up, reflecting faster increases in services prices and non-energy industrial goods.

The government balance was expected to remain in surplus over the coming years, such that the debt-to-GDP ratio was projected to decline to 36.1% by 2022.

The COVID-19 global health crisis, however, has meanwhile prompted a powerful and ongoing economic shock. In this regard, the Central Bank of Malta has made some preliminary estimates of the impact of the containment measures imposed by the Maltese government until 15 March 2020. At that juncture, the Bank estimated that containment measures imposed until that date would lower GDP growth by around 3.5 percentage points, when compared with the baseline projections. In addition, as a result of lower GDP growth, the fiscal balance would be adversely affected by around 0.8 percentage points.

The fluidity of this situation and its unknown duration mean that these estimates are characterised by a high degree of uncertainty. Thus, the Bank is continuously updating its outlook as new information becomes available.

More details on the Bank's latest projections can be found here.

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