Malta's economy is likely to grow faster than first expected over the next couple of years, the Central Bank has said. 

In a report on its outlook for the 2017-2020 period, the Central Bank revised its projections upwards and said it expected to see 6.8 per cent GDP growth this year, falling to 4.8 per cent in 2019 and 4 per cent in 2020. 

That compares to the 5.6 per cent growth it previously expected to see in 2018 and 4.5 per cent in 2019. 

The upward revision came on the back of what the bank called a "positive surprise" in growth data for the third quarter of last year, which bumped GDP growth during that year to 7 per cent. 

Aside from revising GDP figures upwards, the Central Bank said its projections for the government balance were also looking better than first expected, with the debt-to-GDP ratio falling to 44.6 per cent by 2020.

Some key projections the Central Bank has made for the period up to 2020:

• Domestic demand to replace net exports as the main driver of economic growth
• Projected output growth to outpace GDP in 2019 and 2020
• Unemployment to rise marginally to 4.1 per cent in 2019 and 4.2 per cent in 2020
• Wages to rise in 2018 by 3.5 per cent, before growth decelerates in 2019 and 2020, as productivity growth slows
• Major health and education construction projects to temporarily boost private investment
• Government budget to remain in surplus, though the surplus will decline to 0.6 per cent by 2020 as gross saving deteriorate and capital expenditure picks up pace
• Export of services will moderate from "very high rates", though that will be compensated by an increase in the export of goods
• Inflation to rise slightly and settle at around 2 per cent

GDP projections, the Central Bank noted, could turn out to be overly cautious if services exports continued to perform extremely strongly or if wages picked up more than expected, lifting private consumption. 

Conversely, geopolitical factors or delays in major health and education projects could lead to figures lower than those it was projecting. 

"Moreover, the rapid growth the Maltese economy has experienced in the last few years may impinge on infrastructure such that physical constraints may limit future expansions," the CBM added. 

The government welcomed the Central Bank projections, saying the projections now predicted Malta's debt-to-GDP to fall below 50 per cent - the first time in more than 20 years it was expected to do so.