Updated at 4.30pm: Adds government statement

Malta's economic growth is projected to moderate but to remain vigorous over the coming months, the European Commission projected on Thursday in its Spring forecast.

Malta’s economy, it points out, is among the fastest growing economies in the EU, with record-low unemployment and moderate wage growth. The current account and the budget balances are set to remain in surplus.

Domestic demand is expected to become the main driver of growth in 2018, underpinned by the expansion in private consumption and the recovery in

Real GDP growth is forecast to average 5.8% for 2018 as a whole, in a context of favourable labour market conditions and high consumer confidence. The strong performance of the services sector, particularly in areas such as tourism, remote gaming and professional services, is expected to sustain the sizeable current account surplus.

In 2019, investment is expected to pick up further, supported by several projects in the health, technology and telecommunication sectors. With domestic demand projected to remain the main driver of growth, and a modest contribution from
net exports, real GDP is set to increase by 5.1%.

The report observes that labour supply continued to increase thanks to the
inflows of foreign workers and the rising participation of women in the labour market. Strong economic momentum should further support employment creation, while the unemployment rate is forecast to remain at the
record-low rate of 4%.

The increase in the labour supply, it says, has helped to keep wage pressures contained, resulting in stable unit labour costs in 2017. In the near term, higher expected growth in compensation per employees is projected to result in increases of unit labour costs by respectively 1.5% and 1.6% in 2018 and 2019, above the euro area average.

Headline annual HICP inflation is forecast to gradually pick up to reach 1.8% in 2019, driven by price pressures in the services component.

The government debt-to-GDP ratio, which fell to 50.8% in 2017, is forecast to decline further to 43.4% by 2019.

With regard to the EU in general, the European Commission reported that growth rates beat expectations in 2017 to reach a 10-year high at 2.4%. Growth is set to remain strong in 2018 and ease only slightly in 2019, with growth of 2.3% and 2.0% respectively in both the EU and the euro area.

In a statement in the afternoon, the government said it was committed to continue strengthening the basis of the country’s economic growth and invest more for the economy to be further strengthened in the future and for wealth to be distributed among all.


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