Economic activity in the last three months of 2021 continued to recover from the impact of the COVID-19 pandemic, with growth remaining robust and real gross domestic product rising by 10% in year-on-year terms, the Central Bank of Malta said in the second issue of its Quarterly Review for 2022.

The review, published on Wednesday, analyses economic and financial developments in Malta and abroad during the fourth quarter of 2021.

It found that by the end of last year, GDP was slightly above the level that prevailed before the pandemic.

Potential output growth stood at 4.3%, up from 3.8% in the previous quarter. The bank’s estimate of the output gap, while still negative, narrowed, indicating that although the economy’s productive capacity remains somewhat underutilised, activity is gradually normalising. 

The business conditions index stood above its historical level, reflecting strong increases in several sub-components over the fourth quarter of 2020, when most economic variables were subdued due to the pandemic. 

The European Commission’s economic sentiment indicator edged down from the level recorded in the third quarter but remained above its long-term average and its pre-pandemic level.

This may reflect the slightly lower level of COVID-19 restrictions compared to 2020 as well as a further increase in vaccination rates achieved in the second half of the year, the bank said.

Labour market

It also noted that developments in the labour market remained positive. Employment remained above pre-pandemic levels while activity rates rose further.

The unemployment rate continued to decline, falling to 3.2% from 3.6% in the previous quarter, and well below the 4.4% recorded a year earlier. Malta’s unemployment rate also stood well below the average rate of 7.4% for the euro area. 


Inflation picked up during the quarter under review. The annual rate of change of the harmonised index of consumer prices stood at 2.6% in December, well above the 0.7% observed in September.

All components except energy prices registered faster growth, although services inflation was the main driver behind the increase in inflation. Annual inflation based on the retail price index – which only takes into account expenditure by Maltese residents – rose to 2.6% in December from 2.2% in September. 

Deficit and debt

During the fourth quarter of 2021, the general government deficit widened when compared to that recorded in the corresponding period of 2020.

When measured on a four-quarter moving sum basis, the general government deficit reached 8% of GDP in 2021, somewhat lower than the 9.5% recorded in 2020.

Meanwhile, the general government debt-to-GDP ratio rose to 57% from 53.4% at end-2020. The government’s net financial worth as a share of GDP deteriorated in the quarter under review.

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