Set for continued growth

The Central Bank of Malta reaffirms the sustainability of the country’s national debt.

In an in-depth analysis published in the annual report of the Central Bank of Malta, this institution’s experts reaffirmed the sustainability of the country’s national debt. The Bank’s analysts reached this conclusion after considering several extreme scenarios in which Malta experiences massive shocks, and still finding that the country would still respect the European Union’s criteria when it comes to national debt.

Noting the reintroduction of strict rules on public finances, the Bank’s economists predict that the Maltese government will be making a fiscal adjustment that is stronger than what is required by the European Commission. In fact, they are predicting that Malta’s deficit will fall by an average of 0.7% of GDP, which is almost one and a half times the adjustment demanded by the Commission. As a result, the national debt burden is projected to not only remain below the 60% of GDP required by the Union treaties, but to even fall to 50%. If the Government does not stick to its fiscal plans, and relaxes somewhat when it comes to expenditure growth, the national debt is still not expected to exceed 55%.

The Central Bank’s report shows that last year the Maltese government’s financial assets rose to almost €5.5 billion, representing an increase of €578.3 million compared to the previous year. This was mainly due to a sharp increase in public entities’ deposits with local banks. Government and public entities thus have financial assets that account for almost 29% of GDP. In contrast, Government financial obligations decreased last year in terms of percentage of GDP, and now amount to less than 59%. This means that the Government and its entities have sufficient financial assets to cover almost half of these obligations.

The Maltese Government’s net financial obligations amount to less than 30% of GDP, or slightly more than half the net financial obligations of governments in the rest of the euro area, where the average is 54.9%.

Meanwhile, the Central Bank’s report also includes forecasts that the Maltese economy will continue to grow in coming years, while inflation will continue to decline. The deficit is also expected to show substantial improvement. Thus, Malta’s economic performance will continue to be better than that in the rest of Europe.

Malta’s GDP growth last year was mostly driven by exports. This occurred despite a lack of external demand, as this was compensated for by the competitiveness of the country’s products. The key factor for the latter was the fact that the price of energy in Malta was well below the European average. At the same time, the turnover of professional services in Malta continued to grow, with the sector in fact making the largest sectoral contribution to economic growth. This led to an increase in job opportunities, so much so that for the first time in our country’s history there were more job vacancies than there were job seekers.

Photo: Som Thapa Magar

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