Malta’s economy is projected to maintain relatively strong growth over the coming years, even as global economic momentum shows signs of slowing, according to new projections released by PwC.

Global GDP growth is expected to moderate to 2.6 per cent in both 2025 and 2026, down from 2.8 per cent in 2024, amid heightened geopolitical tensions and increasing protectionism. The United States is forecast to grow at just over two per cent, while China’s growth is expected to cool to approximately 4.5 per cent. In the eurozone, growth is set to remain sluggish, with a modest increase from 1.1 per cent in 2025 to 1.3 per cent in 2026, largely driven by a gradual recovery in Germany. India stands out with robust growth projected above 6 per cent.

In this context, Malta’s economic performance continues to outpace that of many of its peers. Official data show real GDP growth of 6.0 per cent in 2024, a slight deceleration from 6.8 per cent the previous year. Forecasts indicate that growth will ease to 4.3 per cent in both 2025 and 2026 – still significantly higher than the euro area average, although the gap is expected to narrow over time.

Sectoral shifts underpinning Malta’s growth

While Malta’s headline GDP figures remain strong, the underlying sectoral data paint a more nuanced picture. Key drivers of growth in 2024 included real estate, construction, financial services and the public sector. Conversely, professional services and manufacturing experienced noticeable slowdowns.

Notably, a divergence has emerged between growth and productivity across sectors. Some of Malta’s traditionally high-performing, high value-added industries – such as professional services, ICT, and arts and entertainment (which includes the iGaming sector) – either slowed or contracted slightly. For instance, GVA data for 2024 shows ICT and professional services growing at just one per cent and four per cent respectively, despite having among the highest value-added per employee at around €100,000.

In contrast, the fastest-growing sectors – public administration (6.2 per cent), construction (6.1 per cent) and wholesale and retail (5.4 per cent, including hospitality) – were among the least productive, generating just €30,000–€35,000 in value added per worker. This suggests that while GDP growth was robust, it was underpinned by relatively low-productivity sectors.

This inverse relationship between growth and productivity is not a trend historically observed in Malta, but if it persists, it could hinder the country’s long-term objective of raising productivity across the economy.

Expenditure trends and consumption patterns

On the expenditure side, Malta’s economic expansion has been largely driven by tourism and entertainment-related sectors. The accommodation and food services industry, for instance, posted a 17 per cent year-on-year increase in 2024, down slightly from 21 per cent in 2023, yet still a major contributor to overall growth. Other key contributors included education and communication.

In contrast, more domestically oriented consumption sectors such as alcohol and tobacco, food and beverage, and personal care recorded a slowdown in growth. Health spending remained steady at 6 per cent, while the furnishing sector rebounded strongly to register a 7 per cent growth rate after a decline in 2023.

While nominal consumption per capita rose by 7.1 per cent to €18,247 in 2024, up from €17,042 in 2023, the real (inflation-adjusted) increase was a more modest 3.7 per cent. The data indicate that price growth continues to drive a significant portion of nominal consumption increases, with real consumption CAGR standing at 3.3 per cent since pre-COVID levels, compared to a nominal CAGR of 6.9 per cent.

Economic sentiment and labour market outlook

Despite solid economic performance, local sentiment turned more cautious in late 2024 and early 2025. The Economic Sentiment Indicator (ESI) dipped to a two-year low in September 2024, before rebounding in November. However, the downward trend resumed into 2025, reflecting ongoing concerns about economic uncertainty.

Meanwhile, the Employment Expectation Indicator (EEI) remained above the 100-point long-term average at the start of 2025, though it, too, is on a gradual decline – suggesting that labour market confidence may be softening.

In summary, Malta’s economy remains resilient in comparison to global and regional peers, with growth forecasts that exceed those of the euro area through to 2026. However, the composition of that growth has shifted towards lower-productivity sectors, raising questions about the sustainability of Malta’s productivity gains in the long term.

While the negative correlation between sectoral productivity and growth observed in 2024 may be an anomaly, policymakers and business leaders alike will need to monitor it closely. Sustaining high-value growth and ensuring that productivity remains a cornerstone of economic strategy will be key priorities for Malta’s economic future.