The Maltese economy is expected to reach 2019 gross domestic product (GDP) levels next year, the central bank said.
In its outlook on the economy up until 2023, the central bank said Malta’s GDP will grow by 4.9% this year, 5.4% in 2022 and 4.7% the following year.
These figures represent a 0.1% downward revision from the bank's previous projections, owing to a weaker than expected start to 2021.
Higher containment measures against COVID-19 impacted economic growth, but the central bank expects this to be broadly offset by a stronger second half of the year due to the strong pace of vaccinations and fiscal support by the government.
The bank maintains its expectation that 2019 GDP levels are to be reached again in 2022.
Overall, domestic demand is expected to be the main driver of growth.
The outlook for the tourism sector remains cautious, the bank said.
Malta's tourism season has been dealt a blow by the failure to make it onto the UK's travel green list. The sector usually depends on visitors from the UK for a major chunk of its business.
On the employment side, the central bank said the labour market has shown remarkable resilience.
Companies have generally been able to retain staff and have instead opted to reduce the number of hours worked.
The central bank said companies are expected to respond to an uptick in business by returning their employees to normal working hours.
This year, the government deficit is set to narrow slightly to 9.9% of GDP.
The deficit is projected to narrow substantially over the forecast horizon as COVID-19 measures unwind and macroeconomic conditions improve further, according to the central bank.
By 2023, it is forecast to narrow to 4.2% of the GDP.
The government debt-to-GDP ratio is projected to rise to 64% by 2023.
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