Malta's economy continued to demonstrate resilience in recent months, with business activity remaining above its long-term average as manufacturing rebounded, tourism expanded and inflation eased further, according to the Central Bank of Malta's latest Economic Update.

The bank's Business Conditions Index edged slightly higher in May, indicating that economic activity continued to outperform historical norms. The improvement was driven by above-average tax revenue, strong inbound tourism and improving consumer confidence.

Industrial production rose by 7.3 per cent year-on-year in April, reversing the contraction recorded a month earlier, while services production increased by 10 per cent in March, signalling renewed strength in one of Malta's largest economic sectors. Retail trade also registered continued growth.

Tourism remained an important contributor to economic performance. Tourist expenditure increased by 13.1 per cent in April compared with the same period last year, reflecting higher visitor arrivals.

The Central Bank also reported an improvement in Malta's merchandise trade balance, as exports increased while imports declined, narrowing the country's trade deficit.

Consumer confidence strengthened significantly during May, with households expressing greater optimism about both their personal finances and the wider economy over the next 12 months. However, broader business confidence indicators are temporarily unavailable after the European Commission suspended business survey results for Malta and Estonia following changes to its partner institutes.

The property market continued to show underlying strength. Commercial development permits increased compared with a year earlier, although residential market activity moderated, with both promise-of-sale agreements and final deeds declining in May.

Labour market conditions remained relatively stable despite a slight increase in unemployment. Malta's seasonally adjusted unemployment rate rose to 3.6 per cent in April, compared with 3.5 per cent in March and 3.0 per cent a year earlier. Meanwhile, administrative data continued to show positive net employment growth.

Inflation continued to move closer to the European Central Bank's target. The Harmonised Index of Consumer Prices (HICP) fell to 2.1 per cent in May from 2.5 per cent in April, remaining well below the euro area average. Core inflation also eased to 2.3 per cent, with the Bank noting that Malta's stable energy prices helped keep overall inflation lower than elsewhere in the eurozone.

Public finances also improved. The Consolidated Fund recorded a surplus of €18.8 million in April, compared with a deficit of €21 million a year earlier, as stronger government revenue more than offset increased expenditure. For the first four months of 2026, the cumulative deficit narrowed significantly compared with the same period last year.

Meanwhile, annual growth in residents' deposits slowed to 6.2 per cent in April, while annual credit growth remained steady at 7.7 per cent, supported by continued lending to businesses and households. Lending remained strongest in the construction, real estate, accommodation and food services sectors.