Central Bank lowers inflation forecast due to ‘Stabbiltà’

The Central Bank is also forecasting that the Maltese economy will grow by 4.3% this year.

The Central Bank has revised its inflation forecast for this year downwards, from 2.9% to 2.4%. This adjustment reflects a combination of factors, including lower costs for imported goods and the positive impact of the ‘Stabbilità’ scheme, launched in February 2024. According to the Bank’s report, the scheme is expected to significantly curb inflation, particularly in processed food prices, which are projected to see only half the increase they would have otherwise.

This year’s decline in inflation has led the Central Bank to adjust its forecasts for the next two years, predicting inflation to dip below 2% by 2026 – a level not seen in years.

Meanwhile, the Central Bank is forecasting that the Maltese economy will grow by 4.3% this year. This is mainly because domestic demand is expected to be sustained. Private consumption will be affected positively by wage improvements as well as by the fact that households have strong savings from past years. Investment is also expected to grow.

At the same time, while the service industry is expected to increase its sales further, manufacturing is projected to be adversely affected by the dire situation in several European countries.

Reflecting the sustained economic performance, the unemployment rate is expected to remain at a low of 3.1%. The Government deficit is expected to decrease from 4.9% last year to 3.1% in 2026. The national debt will remain below 55% of GDP, below the 60% level required by European Union rules. This will happen despite the fact that the Government will be investing around 3.5% of GDP in capital projects in the coming years, a similar percentage to that observed on average since 2013.

Photo: Gustavo Fring

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