28/07/2025 10:39:00

Central Bank of Malta publishes its Quarterly Review on economic developments for the first quarter of 2025

During the first quarter of 2025, annual growth in real GDP was marginally below that of the preceding quarter. Growth was mainly driven by domestic demand, as the contribution from net exports was limited. Real GDP growth remained above the average rate for the euro area.

The Bank's estimate of the output surplus narrowed, indicating some moderation in the degree of over-utilisation of the economy's productive capacity.

The Bank's Business Conditions Index and the European Commission's Economic Sentiment Indicator decreased slightly compared to the previous quarter but remained above their long-term average.

Meanwhile, the Bank's Economic Policy Uncertainty Index, an indicator that monitors economic policy uncertainty by synthesising information gleaned from Maltese news portals decreased significantly in the first quarter and fell below its historical average. Uncertainty was primarily driven by heightened geopolitical tensions and uncertainty overseas, though domestic factors also played a role.

Developments in the labour market continued to show resilience amid tentative signs of moderating demand. The unemployment rate reached a new low and stood well below that in the euro area. While the job vacancy rate decreased slightly from that in the corresponding quarter of 2024, the labour tightness indicator increased further and thus remained elevated. According to the Labour Force Survey, employment growth in Malta was higher than the euro area average.

Consumer price pressures edged up during the first quarter of 2025. Annual inflation, as measured by the Harmonised Index of Consumer Prices (HICP) increased to 2.1% in March, while the measure excluding energy and food also stood at 2.1%. Both measures of inflation stood below those recorded in the euro area.

In the first quarter of 2025, the general government balance posted a surplus, in contrast with the deficit recorded in the same period a year earlier. However, the general government debt-to-GDP ratio rose. The deficit-to-GDP ratio stood slightly higher than in the euro area, while the debt ratio was significantly lower.

During the quarter under review, the Governing Council of the European Central Bank (ECB) lowered the policy rates by 50 basis points cumulatively as the disinflation process remained well on track.

ECB interest rates were lowered by a further 50 basis points between April and June 2025, with the deposit facility rate standing at 2.00%. The Governing Council stated that especially in current conditions of exceptional uncertainty, it will continue to follow a data-dependent and meeting-by-meeting approach in determining the appropriate monetary policy stance. It also reiterated that it was not pre-committing to a particular rate path.

The third issue of the Quarterly Review for 2025 is available on the Bank's website.

For more recent indicators kindly consult the Economic Update. 

Back to Archive