Updated with prime minister's reaction at 3.30pm
Passport sales are expected to taper off, which will start to have an impact on government revenue, according to the European Commission’s spring economic forecast for Malta.
Until now, economic growth had resulted in considerable increases in tax revenue and social contributions, however, the government has been spending more, which will have an impact on the surpluses recorded recently. The headline government surplus was 2.0 per cent of GDP in 2018, down compared with 2017, but it was projected to shrink yet again by 2019 to 1.1 per cent and to 0.9 per cent by 2020.
The report forecast that the “brisk pace of growth would ease slightly”, saying that the growth rate in real terms of 6.6 per cent in 2018 would slow down to 5.5 per cent this year and 4.8 per cent in 2020.
The forecast is conditioned by various factors which could impact it negatively or positively. The European Commission said that trade tensions and rising uncertainties in the island’s trading partners could have negative effects. On the other hand, private consumption could be even stronger than expected, as more jobs are created and savings start to accumulate.
The report said that investment had lagged somewhat in 2018 but that it would pick up this year and next, as large investment projects take shape in the health, transport and tourism sectors.
The tight labour market would in theory drive up wages, however, this is being avoided thanks to the “significant inflow of foreign workers”, it noted, adding that wage pressures would only gradually materialise by 2020.