02/02/2026 11:33:00

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

During the third quarter of 2025, real GDP growth increased at a faster pace when compared with the preceding quarter. Growth was driven by domestic demand and net exports in almost equal proportion. The pace of expansion was more than double the average for the euro area.

According to the Bank's estimates, potential output grew at a slightly slower rate compared with the second quarter. The positive output gap narrowed, implying a further moderation in the degree of over-utilisation of the economy's productive capacity.

The Bank's Business Conditions Index remained relatively unchanged in the third quarter, indicating that the pace of economic activity remained slightly above its long-run average. Meanwhile, the European Commission's Economic Sentiment Indicator increased and stood above its 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, marked the highest quarterly reading since the start of the year and remained well above its historical benchmark. Uncertainty was primarily driven by domestic factors, namely related to the acquisition of a domestic bank, although international developments also contributed to the elevated level of uncertainty.

During the third quarter of 2025, the labour market continued to perform positively amid a further rise in activity and higher employment rates. The unemployment rate reached a historical low and remained well below that in the euro area. Meanwhile, the job vacancy rate increased slightly, and the labour market tightness indicator remained elevated. According to the Labour Force Survey, employment growth in Malta remained above that in the euro area.

Consumer price inflation declined slightly in the third quarter of 2025. Annual inflation, as measured by the Harmonised Index of Consumer Prices (HICP) stood at 2.4% in September, down from 2.5% in June, while the inflation measure that excludes energy and food declined marginally to stand at 2.3%. Both measures of inflation were above those recorded in the euro area.

In the third quarter of 2025, the general government balance registered a higher surplus compared with a year earlier. However, on a four-quarter moving sum basis, the general government balance registered a deficit. The deficit-to-GDP ratio narrowed when compared with the second quarter of 2025 but remained above that in the euro area. The debt ratio was lower than that posted a quarter earlier and stood well below the corresponding euro area average.

During the third and final quarters of 2025, the Governing Council of the European Central Bank (ECB) kept its key policy rates unchanged. It reaffirmed that it stood ready to adjust all its instruments within its mandate to ensure that inflation would stabilise at its 2% target in the medium term and to preserve the smooth functioning of monetary policy transmission.

The first 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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