Malta’s economic growth remains one of the strongest in Europe, owing to favorable economic conditions and sound policies, which advanced structural reforms and supported the strengthening of private and public balance sheets, according to an International Monetary Fund (IMF) report.
The report has also highlighted the fact that, robust growth, along with the continued influx of foreign workers, has led to increased infrastructure needs and contributed to higher housing prices.
“The June snap election, which resulted in the Labor Party maintaining a comfortable majority in Parliament, provides a strong mandate for the government to pursue its reform strategy.”
“Output is estimated to have expanded by 6.8 percent in 2017, accompanied by dynamic job creation, which brought unemployment to a record-low. Strong inflows of foreign workers and rising labor force participation kept wage pressures contained in most sectors, thus contributing to low inflation despite a positive output gap. At the same time, the rapid economic expansion and the growing population have put pressure on physical infrastructure and resulted in a continued housing market appreciation.”
“The fiscal balance is estimated to have registered a surplus for the second consecutive year in 2017, thanks to buoyant revenues—including from Individual Investor Program proceeds—and contained capital expenditure growth. The 2017 current account is estimated to have remained in surplus, driven largely by a sizable balance of services.”
Domestic banks remain profitable and well-capitalized, the IMF report reads, but high legacy corporate non-performing loans represent a persistent challenge for the banking sector.
“The outlook is favorable, with growth decelerating gradually and converging to about 3 percent over the medium term. Growth is expected to be driven largely by domestic demand, backed by rising incomes and historically-low unemployment while buoyant services exports will continue to sustain current account surpluses. Inflation is set to pick up gradually, reflecting an increase in import prices and tighter labor market conditions. Headline fiscal surpluses are forecast to continue and contribute to a further moderation of public debt.”
In a statement the government noted that the IMF report points out that the government has reached its fiscal targets “three years ahead of schedule”, that unemployment was at a record low and the country’s economic progress is reflected in an improved credit rating.
The IMF said these were a result of the government’s prudent policies, the statement said, adding that “growth is projected to remain robust throughout the forecast horizon.”
“The government is set to over-achieve the 2017 budget target,” the IMF said, with 2017 closing with an actual surplus of 1.4% against the 0.8% projections. The IMF is forecasting a surplus of 0.8% against target of 0.5%.
The government also said the IMF report states on the Individual Investor Programme (passport sale scheme) that: “the application process is subject to stringent due-diligence by Identity Malta, resulting in a rejection rate of around 20 percent”.