EU Commission forecasts 4.6% Maltese economic growth for 2024, notes sluggish real wage growth

The European Commission has forecast a 4.6% growth rate for the Maltese economy in 2024.

In its latest macroeconomic forecast, the Commission noted that Malta’s economic growth is fuelled by strong exports and domestic demand, adding that while government deficit stood at 4.9% of GDP last year, this will gradually decrease in 2024.

“Both private consumption and exports came much stronger than expected, resulting from significantly higher immigration and tourism flows,” the Commission explained, noting the country’s “exceptionally strong immigration.” Malta’s energy subsidies were also credited for the forecast. 

Export of electronics and entertainment, as well as professional and financial services are predicted to grow strongly. Meanwhile, construction investment is expected to, “stabilise and recover moderately after a sharp fall in 2023, growing at 2.5% in 2024 and 3.9% in 2025.”

With regards to employment growth, the Commission forecast a 4% growth in 2024 and 2025, as more workers migrate towards the country. “ Labour and skills shortages are still mentioned as the main limiting factors for the Maltese economy. ”

The unemployment rate underwent a revision in 2022, increasing from 2.9% to 3.5% following an updated demographic survey. However, by 2023, it declined to 3.1%, with further drops anticipated to 3% and 2.9% in 2024 and 2025 respectively. Despite this trend, nominal wage growth remained sluggish in 2023, leading to a decrease in real wage growth per capita due to expansion in low-wage sectors.

Regarding government finances, the general government deficit reduced to 4.9% of GDP in 2023 from 5.5% in 2022, primarily due to decreased subsidies and restructuring costs within the national airline. 

The Commission’s projections indicate a decrease in the deficit to 4.3% of GDP in 2024, attributed to controlled growth in intermediate consumption expenditure and public wages, alongside the phasing out of Air Malta's restructuring expenses. However, this reduction may be offset by an increase in the net budgetary cost of measures addressing high energy prices, projected at 2% of GDP in 2024.

Under unchanged policies, the deficit is expected to decrease to 3.9% of GDP by 2025, driven by reductions in measures addressing high energy prices. The debt-to-GDP ratio fell to 50.4% in 2023 despite a high primary deficit, primarily due to robust nominal growth. 

The Commission forecast an increase in debt to 52% of GDP in 2024, largely due to a positive stock-flow adjustment related to equity injection in the national airline. By 2025, a smaller primary deficit and favourable interest growth differential are anticipated to result in a smaller increase in public debt, reaching 52.6% of GDP.

On X, Prime Minister Robert Abela noted that while Malta's economic prospects were revised upwards, other member states saw a downward revision.