The European Commission expects Malta's economy to show the strongest growth this year and next year, according to projections issued on Wednesday.

Real GDP growth across the EU in 2024 is projected at 1.0%, improving to 1.6% in 2025. Nearly all member states are expected to see growth, but Malta's is expected to be the strongest, at 4.6% this year and 4.3% next year, followed this year by Romania (3.3%), Croatia (3.3%) and Denmark (2.6%).

But the report also shows that Malta saw the weakest wage growth in the EU last year.

"Wage growth continued to be fastest in some of the eastern countries (Romania, Bulgaria, Hungary and Poland), while it was lowest in Malta, Italy and Ireland." the EU's Spring forecast says. 

The report says Malta had the third-lowest unemployment in the EU last year, and the country is expected to enjoy the fastest employment growth at around 4% in both 2024 and 2025. 

In describing Malta's economy as robust, the report says both private consumption and exports were stronger than expected, resulting from significantly higher immigration and tourism flows.

"Besides exceptionally strong immigration, Malta’s economy continues to benefit from a low pass-through of monetary policy to retail interest rates and from government measures that have kept energy prices stable at 2020 level."

Government deficit remains high

In 2023, the general government deficit fell to 4.9% of GDP, from 5.5% in 2022, due mainly to the decrease of subsidies, including measures to mitigate the impact of high energy prices, and of the national airline's restructuring costs. In 2024, the deficit is forecast to further decrease to 4.3% of GDP, the report says.

A contained growth of intermediate consumption expenditure and of the public wage bill are the main factors determining the reduction of the deficit. The phasing out of the national airline's restructuring costs is also expected to contribute to the deficit reduction.

This is projected to be partially compensated by an increase in the net budgetary cost of measures to mitigate the impact of high energy prices to 2.0% of GDP in 2024, from 1.7% in 2023, related to the expansion of targeted income support and to the evolution of oil prices to which gas import prices are linked.

Based on unchanged policies, the report says the deficit is set to decline further to 3.9% of GDP in 2025 "mainly reflecting the expected reduction of measures to mitigate the impact of high energy prices" (to 1% of GDP) driven by the reduction of targeted income support and the drop of oil prices.