Economic update May 2016

Abstract

Economic activity in Malta continued to expand robustly in the fourth quarter of 2015, with real gross domestic product (GDP) increasing by 5.7% on a year earlier. Growth was driven by domestic demand. Buoyant economic activity is being reflected in the labour market, with employment expanding and the unemployment rate remaining at historically low levels. More recent data point to continued growth in the exports of tourism services during the first quarter of 2016, offset partly by a decline in manufacturing output. Meanwhile, unemployment fell further. Price pressures were moderate. The annual rate of inflation, based on the Harmonised Index of Consumer Prices (HICP) eased to 0.8% in April. Maltese residents’ deposits continued to expand at a rapid annual rate in March, while the annual rate of growth of credit to residents eased slightly further, to 5.2%. As regards fiscal developments, the general government deficit narrowed substantially in 2015. On the other hand, the deficit on the cash-based Consolidated Fund widened. In the first three months of 2016, the Fund showed a larger deficit compared with a year earlier, mainly due to lower grant receipts. On the external side, the surplus on the current account of the balance of payments increased in the fourth quarter of 2015.