The European Commission has forecast a 4.6% economic growth for Malta this year, slightly better than the projected average in the Eurozone.
Growth for next year is expected to be even stronger, at 6.1% as Malta recovers from a 7% decline seen last year owing to COVID-19.
The spring forecast also projects a consistent increase in inflation, from 0.8% last year to 1.2% this year and 1.5% next year.
Unemployment is expected to be unchanged this year at 4.3% and fall slightly next year.
On the financial front, a deficit last year of 10.1% is forecast to grow to 11.8% this year before dropping by half next year to 5.5%. The resultant public debt will rise from 54.3% last year to 65.5% of GDP next year.
Prime Minister Robert Abela welcomed the projections. In a tweet he observed that the forecast economic growth rate of 4.6% is one-and-a-half times bigger than the EU's own forecast six months ago. The projection for next year, at 6.1% is, one-and-half-times better than the EU average, he said.
In its report, the European Commission said Malta’s robust recovery in 2021 and 2022 was conditional on the reopening of the tourism sector.
"The recovery is expected to be driven by a rebound in tourism-related services exports, household consumption and investment," it said.
It observed that the COVID-19 pandemic has decimated tourism and made a deep dent in consumption. On the other hand, financial services and gaming sector exports continued to perform robustly.
The government’s sizeable stimulus package has managed to partially offset
some of the impact of the pandemic on the economy, it said.
"Consumption and investment are expected to pick up as the recovery takes hold, helped by high levels of accumulated savings. The faster-than-expected rollout of vaccinations in Malta, the high rate of vaccination in the UK, and a gradual easing of restrictions in the EU, should put the tourism sector back on the path to recovery in the second half of 2021 and re-invigorate domestic demand."
Projections for the whole EU revised sharply upwards
The European Commission also sharply revised its growth forecasts for the whole of the EU, saying an accelerated vaccination drive and the bloc's landmark recovery plan would lift Europe out of recession.
"Recovery is no longer a mirage. It is underway," EU economic affairs commissioner Paolo Gentiloni told a media conference.
According to the European Commission, growth in the 19 countries that use the euro currency will hit 4.3 percent in 2021 and 4.4 percent in 2022, compared with 3.8 percent for these years in its previous estimate given in February.
For the full 27 members of the EU, the commission said the economy will expand by 4.2 percent in 2021 and by 4.4 percent in 2022.
"The shadow of Covid-19 is beginning to lift from Europe's economy," Gentiloni said, though he cautioned that "the risks of a scarring effect remains real".