According to macroeconomic forecasts published by the European Commission, Malta can expect a moderate but vigorous economic growth over the next couple of years. The latest economic forecast predicts that the current account and budget balances are to remain in surplus, reflecting the fact that Malta’s economy is one of the fastest-growing in the EU, boasting of record-low unemployment and steady wage growth.
Malta GDP Growth & Economic Success
The Maltese economy is experiencing above average economic growth and is expected to continue to do so even in 2019. Since 2014 the Maltese economy outperformed that of the EU. The substantial current account surplus which instigated the GDP growth was largely a result of heightened activity in the services sectors, leading to intensified export growth and a strengthened external position.
Real GDP grew by 6.6% in 2017. This predominantly contributed to the significant increase in the fiscal surplus to 3.9% of GDP for 2017, following a 1% increase in 2016 and government deficits in the previous years. This surplus can be explained by the high growth rate of current revenue, including tax revenue as well as proceeds from Malta’s citizenship programme which had a healthy contribution of 2.6% to the country’s GDP. Furthermore, the government debt-to-GDP ratio fell to 50.8% in 2017. The projected growth in GDP and resulting surplus is expected to further diminish the debt-to-GDP ratio to 43.4% by 2019.
Malta's Projected Economic Growth
The positive growth trend is expected to continue in the coming years despite seeing a slight ease compared to the rates registered in 2016 and 2017. Real GDP growth is forecast at 5.8% and 5.1% in 2018 and 2019 respectively. The main drivers of growth will likely be a surge in domestic demand due to increase in disposable income, expenditure related to national projects and a vibrant growth in the services sectors. New opportunities arising in emerging economic areas such as blockchain and cryptocurrency could prove to be particularly beneficial for the country.
The strong economic momentum should further boost employment and maintain the current low unemployment rate, which currently stands among the lowest in Europe at 3.5% as of February 2018. The inflows in foreign workers and increased participation of women in the labour force has also led to a rise in the labour supply. Foreign direct investment has left its own impact on both the economy and employment, having reached a total of €165 billion in 2017. So far, the economy has managed to maintain its grip on inflation, which stood at 1.37% in 2017. However, price pressures in the coming years are forecast to spur price increases resulting in a higher, yet moderate inflation rate of 1.8% in 2019.
Contribution by the Malta Citizenship Programme
The valuable input to the country’s economy from the Malta Citizenship Programme can be explained through the latest statistics on the programme’s performance. In the latest report issued by the Office of the Regulator of the Malta Individual Investor Programme, statistics were provided for the 12-month period between July 2016 and June 2017. During this reference period, the programme attracted 377 new submissions, which while representing a decline from the 451 applications recorded during the previous period, brings the total amount of applications since the programme’s inception in 2014 up to 1101.
Since launch the programme has generated a considerable positive direct and indirect impact on the local economy. In terms of property investments for the period July 2016 -June 2017, the vast majority of applicants (88% or 340) opted for the leased option, whereas the remaining 12% (46) purchased the property. The amount invested on property purchases averaged at around €868,173 per property which is significantly higher than the minimum €350,000 stipulated under the programme. Similarly, the annual average rental value for leased property stood at €21,128 compared to the minimum €16,000 required.
The amount invested in Government stocks totalled €58,371,279 during the same reference period. The financial contributions to the National Development and Social Fund amounted to €194 million, whilst €83 million where transferred to the Consolidated Fund. Identity Malta Agency which manages the programme received €16 million in contributions over the same period. According to the forecasts published by the European Commission the Malta individual Investor Programme contributed 2.6% of the country’s GDP in 2017.
