The Central Bank of Malta’s March Economic Update highlights a maturing economic cycle, with business activity growth moderating towards its long-term average. Key indicators signal stability, presenting a balanced outlook for investors assessing Malta’s economic landscape.

Economic Stability and Business Growth
The Bank’s Business Conditions Index shows that annual business activity in February has slightly eased, aligning more closely with long-term trends. Meanwhile, the Economic Policy Uncertainty Index, despite increasing from January, remains below historical levels, reflecting a relatively stable policy environment.

Sectoral Performance and Labour Market Resilience

• Industrial production and retail trade maintained growth in January, albeit at a slower pace than December.
• Services sector reported positive annual growth at the end of 2023.
• Labour market strength persisted, with unemployment steady at 3.0 per cent – a historically low level.

Real Estate and Financial Sector Trends

• Real estate activity showed mixed trends: residential building permits in January exceeded year-ago levels, and February saw an increase in residential promise-of-sale agreements. However, final deeds remained largely unchanged.
• Banking sector growth remained robust, with deposits by Maltese residents and credit expansion accelerating through January.

Inflation and Fiscal Developments

• Inflation edged higher in February, with the Harmonised Index of Consumer Prices (HICP) rising to 2.0 per cent, though still below the euro area average. Core inflation remained stable at 2.0 per cent.
• Government finances experienced higher spending pressures, leading to a larger deficit in January compared to the previous year.

Investor Outlook
Malta’s economic fundamentals remain solid, with key sectors demonstrating resilience despite short-term fluctuations. Investors should monitor inflationary trends and Government fiscal policies while capitalising on opportunities in banking, real estate, and key business sectors.

Image credit: Inigo Taylor