Malta’s economy continues to show resilience, with a strong labour market, a vibrant housing sector and steady financial conditions, according to the Central Bank’s July economic update.

The labour market remained exceptionally strong, with unemployment falling to 2.5 per cent in June – a new historical low. The housing sector also continues to expand, with residential building permits rising in June, and both promise-of-sale agreements and final deeds of sale increasing in July compared with the same period last year.

Financial conditions remained steady, with the annual rate of change in residents’ deposits unchanged in June, and credit growth edging higher. Meanwhile, industrial production and retail trade rose in June, supporting overall economic activity.

However, business sentiment indicators suggest a more cautious outlook.

The Bank’s Business Conditions Index showed that annual growth in business activity slowed in July, although it remained moderately above its long-term average. Economic Policy Uncertainty also rose sharply from June, standing above its historical average.

Confidence indicators weakened slightly, with the European Commission’s Economic Sentiment Indicator and Employment Expectations Indicator both falling below their long-term averages. Meanwhile, services production contracted for the fourth consecutive month in May, highlighting challenges in the sector.

Inflation remained above the euro area average. The Harmonised Index of Consumer Prices (HICP) stood at 2.5 per cent in July, unchanged from the previous month, while HICP excluding food and energy was 2.4 per cent. The Retail Price Index (RPI) also remained steady at 2.4 per cent.

On the fiscal side, the Consolidated Fund deficit widened in June compared with a year earlier, reflecting lower Government revenue and a rise in expenditure.

Overall, the July update paints a picture of an economy that remains fundamentally strong, supported by robust employment, housing growth and steady financial conditions, even as business sentiment and services activity face moderation.

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