While many of us have been enjoying a well-needed summer break, in just over forty days, three important institutions have chosen to revise upwards and publish their economic forecasts for our country.
The first upward revision was announced by the European Commission as part of its Summer 2021 Economic Forecasts published in the first week of July. While in the Spring Forecasts, Commission experts were forecasting a growth rate of only 4.6% for Malta this year, in the subsequent Summer Forecasts they reviewed their projection up by one percentage point. This was twice the upward revision carried out for the rest of the euro area. This, in itself, is evidence that while improving foreign conditions are helping the Maltese economy, most of our progress is driven by domestic factors.
A fortnight later, another very strong revision of our country’s economic prospects was issued. This time the revision followed the annual assessment of our economy carried out by a delegation of the International Monetary Fund (IMF). The IMF experts were even more optimistic than their European Commission counterparts and chose to publish a growth rate of 5.8% for our country this year, which means an upward revision of 1.1 percentage points from their previous forecast. Even when it comes to economic growth next year, these international experts have chosen to raise our country’s prospects, raising GDP growth projections to 6%.
The European Commission’s upward revision for Malta was twice that carried out for the euro area.
The third and final revision was published in the aftermath of Santa Marija. It was the turn of the Central Bank of Malta. For 2021, the Bank’s economists are now forecasting growth of 5.1%, while next year they are seeing an expansion of 5.9%. This would mean that by next year, GDP level would be more than 11% larger than it had ended in 2020. This is a slightly more conservative forecast than that of international agencies which are instead forecasting an expansion of 12%. In a context where the impact of the pandemic was a reduction of less than 8% of national output, this means that amongst all experts there is an overall agreement that in 2022 our country’s economy will be noticeably bigger than it was in 2019, i.e. before the pandemic struck. Quite a different end-result than the 50,000 unemployed some had forecast at the outset of the pandemic.
Despite the constraints that the tourism sector has continued to face, as well as the unhealthy state of external demand as the outbreak in foreign countries continues to peak, there is consensus among all institutions that Malta’seconomic prospects are very good. This is due to the government’s wise policy of helping domestic demand recover, which is more than making up for the lack of external demand. The forthcoming budget will surely be another occasion for Government to prime up our economy and guide it to new prosperity.
One final consideration. All these upward revisions occurred before the 2021 Q2 figures were released. These showed that during the second quarter of the year Malta registered the fastest rate of economic growth in history. Not only was the growth rate, 13.4%, nearly two percentage points more than the previous record-holding quarter, in 2017; the quarter also witnessed the highest level of investment and employment income ever recorded. At the same time, the number of persons on the unemployment register fell to the lowest amount on record.
With results like these coming in, the safest bet is that economic institutions will be revising upwards their economic projections for Malta yet again.