Malta’s economic growth projections have been revised “a bit downwards” because of global inflation pressures, Finance Minister Clyde Caruana said.

He said inflationary pressures are being experienced across Europe and the rest of the world in large part due to rising energy costs.

Caruana noted how growth rates in the US, too, had also been revised downwards due to significant inflation.

The finance minister said economic theory suggests that an increase in prices is usually followed by an economic slowdown.

The European Central Bank and the American Federal Reserve are contemplating increasing interest rates, which tends to dampen economic growth, Caruana added.

He said all these factors could lead to some economic slowdown in the coming months, and especially next year.

Declining growth projections

The latest Central Bank figures predict growth rates to slow from 6% this year to 5.3% in 2023 and 3.8% in 2024.

These figures come with a caveat however, as the Central Bank says the cut-off date for the modelling of these projections was prior to Russia’s invasion of Ukraine in late February.

The indirect impact of the war through lower trade, coupled with prolonged elevated commodity prices, could further impact economic activity, the report notes.

Central Bank governor Edward Scicluna, a former finance minister, has recently warned that the government should not lose sight of its target to bring down the deficit.

The deficit hit €1.2 billion last year, with the government targeting a reduction this year.

A massive €200 million has been committed to keeping energy prices stable, however, cost savings are being sought elsewhere.

As part of efforts to trim this deficit, Caruana has confirmed the finance ministry is conducting an ongoing exercise to try to cut costs.

According to a European Commission fiscal sustainability report, Malta is facing a ‘high risk’ to its medium- and long-term financial sustainability.

Brussels moved Malta from a ‘medium risk’ to the high-risk category for both its medium- and long-term public financing.

This, it says, is mainly driven by the country’s current budgetary position, which has been severely depleted by government spending during the virus pandemic. 

The immediate risks to Malta’s sustainability, however, remain classified as low in the report.

Independent journalism costs money. Support Times of Malta for the price of a coffee.

Support Us