In their Autumn 2021 forecasts, European Commission economists are predicting that next year the Maltese economy will be the fastest growing economy.
Whereas compared to the previous set of forecasts, the Commission’s economists downgraded their prediction for the EU, they once again revised upwards their forecasts for our country’s economic expansion. The latter is now expected to be 6.2%, or almost two percentage points above the European average.
In addition, the European Commission’s report shows that while between 2008 and 2012 our country’s economy grew by 2.5%, the average growth in the coming years will be well over double.
This reflects two factors according to the European experts. On the one hand, domestic demand is rising sharply. On the other hand, there is an expansion of investment, both private and public. In the coming years exports are also expected to rebound, while tourism will recover gradually. So much so that by mid-2022, the economy will have exceeded its pre-pandemic level according to the European Commission.
The European Commission predicts that Malta’s economy will exceed pre-COVID levels by mid-2022.
The report notes how the impact of the pandemic on employment was “successfully countered by public support measures”. Instead of falling, employment continued to rise, and unemployment is expected to remain below 4% for the near future, with each year returning a new record low.
While the Opposition criticises Government on the cost of living, according to the European Commission, inflation in Malta is moderate. The principal reason is for contractual agreements in the energy sector, which ironically, the Opposition is opposed to.
Inflation next year is expected to be half of that observed between 2008 and 2012 when a Conservative Government pushed the burden of rising international oil prices on households and businesses.
Even when it comes to public finances, the European Commission’s analysis is entirely at odds with what Opposition spokespersons claim. While the latter say that the deficit is due to irresponsible over-spending, international experts say that:
“the increase in public expenditure related to pandemic-related stimulus measures is the main factor contributing to this increase in the deficit”.
While the Opposition Leader said that it is not possible that Government’s fiscal targets will be achieved and that it is impossible to increase revenue as the Government has said, the European Commission has said that the deficit will decrease in line with Government’s aims principally as revenues will increase. So much so that the national debt burden will remain well below what it was in 2013. This despite that public investment is expected to be twice what it was in the last Conservative administration.