Malta: Risk Assessment

Source: Global Edge

vallettaResilient growth but dependent on European demand

Malta’s economy is the most open in the EU after Luxembourg. Growth still depends on the economic situation in the rest of the EU, which absorbs nearly half of exports. The production of electronic components and exports of pharmaceuticals are expected to remain buoyant in 2014. Moreover, the strong tourist industry (25% of GDP) still supports the services sector. The number of holidaymakers (85% coming from Europe) has been growing strongly since 2010. On domestic demand side, household spending is expected to rise in 2014 in line with the labour market resilience to the economic slowdown, with an unemployment rate below 7% since 2011.

 

At the same time, the rate of women’s participation in the labour market, the lowest in the Eurozone at 48%, continues to improve as a result of tax incentives introduced since 2011 and providing a sustainable boost to household income. In an electoral context, public investment is expected to remain stable in 2014, but the fiscal constraints made necessary by the Maastricht criteria persist. The banking sector’s robustness will preserve the supply of credit and ensure the financing of the private sector. Finally, inflation will remain subdued due to energy price cuts. Electricity and water tariffs are expected to be lowered by 25% and 5% respectively in March 2014 for households (2015 for companies) and will limit inflation. Read more >