Population Projection Revisions and Their Impact on Economic Growth – The Case of Malta (2019)

Aaron G Grech & Ian Borg

Abstract

Typically, in short-term economic forecasts, population projections, and their related impact on the availability of labour, tend to be the most stable component. The scope of this paper is to show how in the case of Malta, the European Union’s smallest economy, migration flows have led to substantial revisions in population projections. Using the standard production function approach to estimate potential output growth, these revisions change very substantially expectations of economic expansion. Revisions in population projections are, in fact, estimated to have boosted Malta’s potential output growth in future years by as much as half a percentage point. While potential output is seen as a fairly stable variable for medium and large economies, it is more of a fluid concept for small open economies that are subject to large migration flows.

Research in Applied Economics (2019), Volume 11, Issue 3, pp. 69-82, DOI: 10.5296/rae.v11i3.15285