03/08/2026 08:50:00

Central Bank of Malta publishes its Quarterly Review on economic developments for the first quarter of 2026

During the first quarter of 2026, growth in real Gross Domestic Product (GDP) moderated when compared with the preceding quarter, although it remained robust. Moreover, the pace of economic expansion remained above that in the euro area. Growth was largely driven by domestic demand, even after adjusting for imports.

As the level increase in potential output relative to the previous quarter exceeded that in GDP, the output surplus decreased.

The Bank's Business Conditions Index rose marginally from the preceding quarter, confirming earlier indications that economic activity continued to expand at a pace above its long-run average.

During the first quarter of 2026, the labour market continued to perform strongly, with the activity rate increasing over a year earlier. Furthermore, according to the Labour Force Survey, employment growth in Malta remained stronger than in the euro area. Although the unemployment rate edged up slightly, it remained well below that in the euro area. Labour market conditions remained tight from a historical perspective. Although the vacancy rate decreased compared with the previous quarter, it remained elevated from a historical perspective.

Consumer price inflation moderated during the first quarter of 2026. Annual HICP inflation eased to 2.3% in March 2026 from 2.5% in December 2025, while HICP inflation excluding energy and food increased slightly to 2.4%. Although headline HICP inflation remained below the euro area average, underlying inflation, as measured by HICP excluding energy and food, stood marginally above that of the euro area.

In the first quarter of 2026, the general government registered a larger deficit than in the corresponding period a year earlier. On a four-quarter moving sum basis, the deficit-to-GDP ratio increased from the fourth quarter of 2025 and stood broadly in line with the euro area average. Meanwhile, the debt-to-GDP ratio declined from the previous quarter and remained well below the corresponding euro area average.

During the first quarter of 2026, the Governing Council of the European Central Bank (ECB) kept its key interest rates unchanged. In June, however, the Governing Council raised its key policy rates by 25 basis points in line with its commitment to ensuring that inflation stabilises at its 2% medium-term target. The Governing Council stated that with this decision, it remained well positioned to navigate the uncertainty caused by the war in the Middle East.

The third issue of the Quarterly Review for 2026 is available on the Bank's website.

For more recent indicators kindly consult the Economic Update.

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