Recently, the National Statistics Office published the data on Malta’s gross domestic product (GDP) for 2022. The economic data for the last year is particularly interesting as the previous two years were characterised by the impact of the coronavirus. Since we consider 2022 as a year of recovery, it is pertinent to ask whether all the components of our economic engine have recovered in a similar manner.
Admittedly, 2022 was also not a normal year because of the Russian invasion of Ukraine and the increased rate of inflation. These have created their own problems and, as such, the dust has not settled yet. On the other hand, we are living in a new norm and the economy needs to adapt to it.
In 2022, the GDP grew by 12.5% in nominal terms and by 6.9% in volume terms when compared to 2021. Since 2019, the GDP grew 18.9% in nominal terms and by 9.2% in volume terms.
From the output side, the sectors that have grown at this rate or even at a higher rate are agriculture and fisheries, manufacturing, the ICT sector, financial and insurance activities, public administration activities and the entertainment sector (which includes in its definition the iGaming sector).
The construction sector has actually shrunk slightly in volume terms since 2019, and real estate activities increased by a lower rate than the national average. The retail and the accommodation sector and the professional services sector also did not increase at the same pace as the whole economy.
In effect, four sectors that had contributed greatly to the country’s economic growth have not recovered as much as the rest of the economy from the pre-coronavirus period. Is this the start of a trend? There was the country’s greylisting in the meantime, and this could have affected the level of activity in the professional services sector.
There has been a shift in structure of the non-Maltese population, and this could have affected the real estate sector. The increase in retail outlets and tourist accommodation facilities may also have contributed to a slower growth rate in this sector.
From the expenditure side, household consumption expenditure increased by 6.4%, nearly a third below the growth of the whole economy. This was compensated for by a 26% increase in government consumption and a 130% increase in machinery and equipment.
This indicates that government has strongly supported through its expenditure the growth we had in 2022. The extent this support is sustainable is a question that needs to be asked. Equally, how much of the investment in machinery and equipment in 2022 was a one-off and to what extent will it be repeated in 2023 and in coming years?
Government has strongly supported through its expenditure the growth we had in 2022
Just as the proverbial swallow does not make a spring, nor can we come to definite conclusions on the structure of the country’s GDP. Therefore, we need to see how things will pan out in the coming years.
Most Maltese remain positive about our economy, with 75% judging the Maltese economy positively. There is also optimism about the future, with 41% expecting the economic situation in Malta to get better in the coming 12 months.
However, if the signs we have noted in 2022 persist, then we need to appreciate that pre-emptive action is required.