Highest growth in EU predicted for 2 years straight

Malta will this year experience an economic performance 15 times better than that of Europe's largest economy, Germany.

In its Winter 2024 forecast, the European Commission revised downwards its forecasts for the performance of EU economies. This revision reflected the latest estimates by Eurostat, which showed that the euro area economy just missed going into a recession, because after a decline in the third quarter of 2023, GDP remained stable in the last quarter. To be in a recession, GDP must fall for two consecutive quarters.

This is what has happened to the UK, with the British economy contracting by 0.1% in the third quarter of 2023 and by 0.3% in the last quarter. Households in the UK have greatly reduced their consumption due to steep increases in energy and fuel bills, as well as higher borrowing burdens due to rising interest rates. This has led to a sharp decline in the activity of the retail sector and manufacturing, while even construction faced decreasing demand.

The situation in the EU is little better than in the UK, so much so that the European Commission’s experts revised down the Union’s economic growth to 0.9% this year from a previous forecast of 1.3%. The worst growth rate is expected to be in Sweden, 0.2%, followed by Germany, at 0.3%, and the Netherlands, at 0.4%. In contrast, Malta’s economy, which was previously forecast to grow by 4%, is now forecast to grow by 4.6%. This means that Malta’s economy will grow by five times the EU average this year. Malta will experience an economic performance 15 times better than that of Europe’s largest economy, Germany.

Malta is, in fact, predicted to have the highest growth rate among all European Union countries both this year and next. Last year, Malta saw growth of 6.1%, a rate of economic expansion 12 times the European average.

In their analysis, Commission experts described Malta’s economic growth as exceptional. Growth was driven by strong private consumption as well as a significant export recovery. These trends are expected to continue in the coming years, while it is forecast that there will also be an increase in investment.

In contrast, Commission experts are predicting that the economy in the rest of the EU will remain weak because of high energy prices putting households in a difficult financial situation. An increase in interest rates is also leading to a lack of investment on the part of companies. Im Malta, neither interest rates nor energy prices have risen.

Despite boosting up the economic growth forecasts for Malta, European experts felt they had to greatly reduce their estimates of the inflation rate teh island will face. This is now expected to be below 3% both this year and next, in contrast to previous forecasts. This means that the inflation rate is expected to halve.

One of the key factors behind this rate is the Government’s decision to maintain stability in energy prices. This contrasts with the countries around us where Governments are removing their support in this area because faltering economic growth is leading to lower fiscal revenue.

Photo: Locally Abroad

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