26/04/2024 16:10:00

Central Bank of Malta launches its 2023 Annual Report

The Central Bank of Malta released its 2023 Annual Report during a launch, held at the Bank's premises in Valletta on 26 April 2024. The event was addressed by the Central Bank of Malta Governor, Professor Edward Scicluna, Chief Economist, Dr Aaron Grech, the Deputy Governor for Financial Stability, Mr Oliver Bonello and the Deputy Governor for Monetary Policy Mr Alexander Demarco. The 2023 Annual Report includes detailed financial statements, as well as an analysis of economic, monetary, and financial developments in Malta and abroad.

The Governor, Professor Edward Scicluna, gave an overview of the euro area economic and financial outlook. He stated that inflation in the euro area has fallen sharply in recent months to around 2.5%. This reflects, in large part, the correction in energy prices and unwinding of past cost-push shocks.  Progress with disinflation stems from the further substantial increase in policy rates by the European Central Bank (ECB) and the gradual withdrawal of excess liquidity from the banking system. Additional effects include higher financing costs for borrowers and a slow-down in demand in the euro area.  Core inflation (which excludes the more volatile food and energy components) has also moderated but on this basis, disinflation has been slower.  The ECB's Governing Council is determined to bring euro area inflation to 2% in a timely manner and will ensure that policy rates will remain sufficiently restrictive for as long as necessary. If incoming data increases the Council's confidence that the convergence of inflation to 2% is proceeding in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.

Governor, Professor Edward Scicluna

The Bank's Chief Economist, Dr Aaron Grech, gave an account of Malta's economic growth during 2023. He stated that despite elevated inflationary pressures and higher financing costs, activity has shown resilience. However, inflation has moderated in 2023 and is set to moderate further this year as activity slows down. The decline in inflation is broad-based across components.  Incoming data for the first months of 2024 suggest that inflation continued to decrease, in part reflecting the effect of government price stabilization measures on food inflation. According to the Bank's latest projections, HICP inflation is set to moderate to 2.9% this year.

Chief Economist, Dr Aaron Grech

Mr Oliver Bonello, Deputy Governor for Financial Stability, focused on recent developments affecting the core domestic banks. He emphasised the continued resilience of the local banking system which operates on the back of significant liquidity and strong capital buffers. In 2023, the banks recorded significant profits while their asset quality continued to improve.  Cyclical vulnerabilities stemming from real estate persisted and in this regard the Bank together with the MFSA implemented a sectoral systemic risk buffer which was fully phased in March 2024. Mr Bonello concluded his presentation with an outlook on potential financial stability headwinds.

Deputy Governor for Financial Stability, Mr Oliver Bonello

In his presentation, the Deputy Governor for Monetary Policy, Mr Alexander Demarco, explained that the Central Bank of Malta had a marginal expansion in its balance sheet, owing mainly to an increase in Government deposits. He also stated that the Bank, as a Eurosystem member, maintained its commitment to achieve the price stability objective through interest rate increases during 2023, which continued to adversely impact its income and expenditure account.   A release from provisions to balance the Profit and Loss Account was, therefore, required.

Deputy Governor for Monetary Policy, Mr Alexander Demarco

The launch was attended by officials from credit institutions, diplomats, stockbrokers, economists, social partners, and other socio-economic operators. It also included a Q&A session for the attendees and journalists.

The 2023 Annual Report can be found here.

Governor, Professor Edward Scicluna, addressing the audience

Photos: Melvin Bugeja

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