Malta is set to top the European Union’s economic growth rankings in 2026, according to the latest Eurostat and European Commission forecasts.

Real GDP in Malta was projected to grow by 4 per cent in 2025, driven primarily by robust private and public consumption and sustained investment. Growth is being supported by strong performance in tourism, gaming, and financial and professional services, sectors that continue to underpin Malta’s economic model.

While growth is expected to moderate slightly in the following years, it remains firmly above the EU average (1.4 per cent growing to 1.5 per cent in 2027), with GDP forecast to expand by 3.8 per cent in 2026 and 3.5 per cent in 2027.

In the EU, second on the list for economic growth predictions for next year was Poland at 3.5 per cent, followed by Lithuania (3 per cent), Croatia (2.9 per cent), Bulgaria (2.7 per cent) and Cyprus and Sweden (2.6 per cent). 

Malta in 2025 and the next two years

Household spending remains a key engine of growth. On the back of rising real incomes, private consumption is expected to ease to 3.8 per cent from 4 per cent in 2026 and 3.5 per cent in 2027. Government consumption is also set to provide strong support, increasing by 6.9 per cent in 2025 before slowing to 4.1 per cent in 2026 and 3.1 per cent in 2027, still contributing meaningfully to overall economic expansion.

Tourism continues to play a central role in Malta’s outlook. Following a strong post-pandemic rebound in 2024, tourist arrivals rose further in 2025, with particularly notable growth during shoulder months outside the peak summer season.

Alongside tourism, recreational, professional, IT, and financial services are projected to keep expanding, contributing positively to net exports. Malta’s direct exposure to global trade tensions, including uncertainty around US tariffs, remains relatively limited.

Investment is forecast to remain another important pillar of growth. After an estimated increase of 6 per cent in 2025, investment growth is expected to slow to 1 per cent in 2026 before picking up again to 3 per cent in 2027. While capacity constraints, higher tourism-related prices and labour shortages are expected to weigh on momentum, net exports and investment are still projected to make a positive contribution to GDP growth over the medium term.

The labour market remains tight. Employment is forecast to grow by 3.7 per cent by end of 2025, supported by continued immigration, although inflows are expected to moderate due to tighter rules. Labour shortages are set to persist, even as employment growth slows to 2.9 per cent in both 2026 and 2027. The unemployment rate is expected to remain low and stable at around 2.9 per cent. Nominal wage growth per employee is forecast to moderate but continue to outpace inflation, easing from 5.9 per cent in 2025 to 2.9 per cent in 2027.

Inflationary pressures are expected to ease further. Inflation is forecast to slow to 2.4 per cent by end of the year, before declining to 2.1 per cent in 2026 and 2.0 per cent in 2027, mainly driven by developments in food and services prices. Retail energy prices are expected to remain unchanged over the forecast horizon, supported by continued state subsidies.

Public finances are also projected to improve gradually. The general government deficit narrowed to 3.5 per cent of GDP in 2024, down from 4.4 per cent in 2023, supported by strong revenue growth despite higher expenditure. The deficit is forecast to fall further to 3.2 per cent in 2025, helped by higher indirect tax revenues linked to economic activity and tourism, even as government spending rises. By 2026, the deficit is expected to decline to 2.8 per cent of GDP, and to 2.6 per cent in 2027, reflecting strong revenues, slower growth in public sector wages and a reduction in subsidies and intermediate consumption relative to GDP.

Public debt is expected to remain contained, with the debt-to-GDP ratio broadly stabilising at around 47.3 per cent over the forecast period. Taken together, these projections confirm Malta’s position as the EU’s fastest-growing economy heading into 2026. In a European context marked by slower expansion, demographic pressures and tighter fiscal conditions, Malta is set apart from most other Member States.