17/11/2025 11:16:00

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

During the second quarter of 2025, annual growth in real GDP moderated when compared with the preceding quarter. Growth was mainly driven by domestic demand, although net exports also contributed positively. The pace of expansion was more than double the euro area average.

According to Bank's estimates, potential output grew at a marginally slower rate and the output surplus narrowed, indicating a further moderation in the degree of over-utilisation of the economy's productive capacity.

The Bank's Business Conditions Index remained relatively unchanged from the previous quarter, while the European Commission's Economic Sentiment Indicator increased. Both indices stood above their long-term average.

The Bank's Economic Policy Uncertainty Index, an indicator that monitors economic policy uncertainty by synthesising information gleaned from Maltese news portals, increased significantly in the second quarter and rose above its historical average. Uncertainty was largely driven by external factors, in particular the evolving tariff policy and the economic impact.

During the second quarter of 2025, the labour market continued to show resilience amid a further increase in activity rates. The unemployment rate declined further, remaining well below that in the euro area. Meanwhile, the job vacancy rate and the labour market tightness indicator rose further to a new peak. According to the Labour Force Survey, employment growth in Malta remained above that in the euro area.

Consumer price pressures edged up in the second quarter of 2025. Annual inflation, as measured by the Harmonised Index of Consumer Prices (HICP) increased to 2.5% in June, from 2.1% in March, while the measure excluding energy and food stood at 2.4%. Both measures of inflation were above those recorded in the euro area.

In the second quarter of 2025, the general government balance registered a deficit, in contrast to the surplus recorded a year earlier. The deficit-to-GDP ratio widened compared to March and stood above that in the euro area. The debt ratio increased over the same period but remained well below the corresponding euro area average.

In April and June, the Governing Council of the European Central Bank (ECB) lowered the key policy rates by 25 basis points on each occasion, and brought the deposit facility rate down to 2.0%. During the third quarter of 2025, the Governing Council kept its policy rates unchanged as the inflation rate in the euro area stood around the ECB's 2% medium-term target and the assessment of the inflation outlook remained broadly unchanged.

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

For more recent indicators kindly consult the Economic Update.

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