The Malta Independent 14 April 2024, Sunday
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European Commission predicts ‘robust’ economic growth in Malta

Malta Independent Monday, 5 May 2014, 11:52 Last update: about 11 years ago

The Maltese economy is expected to continue to register “robust” growth this year and the next, according to the latest economic forecasts issued by the European Commission.

Real GDP growth is expected to be around 2.3% in both 2014 and 2015, a rate which is higher than the average for the EU and for the euro area. This year, the EU’s economy is expected to grow by 1.6% while that of the euro area is expected to grow by 1.2%; the growth projections for 2015 are 2% and 1.7% respectively.

This economic growth should mainly be due to domestic demand, particularly household consumption. The Commission predicts that positive labour market conditions and a reduction in utility tariffs are expected to have a beneficial impact on disposable income.

Malta’s unemployment rate – a key political issue locally – is actually expected to remain stable at around 6.5% in both 2014 and 2015.

The reduction in utility tariffs is also expected to have an impact on Malta’s inflation outlook: annual inflation is expected to drop from 1.3% last year to 0.8% year. It is forecast to rise to 1.2% in 2015, but this forecast explicitly does not take into account the planned reduction of utility tariffs for businesses.

The European Commission also expects the general government deficit debt – which stood at 2.8% last year and 3.3% in 2012 – to continue to decrease. But its deficit projections – 2.5% – are less optimistic than the 2.1% target set by the government.

The 2014 Budget is expected to boost revenue through increases in indirect taxation – mainly excise duties – the Individual Investor Programme and the introduction of a new tax regime for rental income. The structural deficit is projected to narrow only marginally this year, after improving by 1 percentage point of GDP last year.

The Commission expects the government debt-to-GDP ratio to improve from 73% in 2013 to 71.1% by 2015 – slightly higher than the 70.8% ratio registered in 2012 – following the repayment of a loan from Air Malta and the partial clearance of some tax arrears from Enemalta. But it sounded a note of caution over the refund of VAT on vehicle registration tax, stating that higher than budgeted disbursements could pose risks to public finance developments.

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