Economic update July 2016

Abstract

Economic activity in Malta continued to expand robustly in the first quarter of 2016, with real gross domestic product (GDP) increasing by 5.2% 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 falling further to new historically low levels. More recent data point to continued growth in tourism during the first five months of 2016, whereas manufacturing output declined. Price pressures were moderate, with the annual rate of inflation based on the Harmonised Index of Consumer Prices (HICP) stable at 1.0% in June. Maltese residents’ deposits continued to expand at a rapid, though moderating, annual rate in May, while the annual rate of growth of credit to residents picked up slightly to 5.6%. As regards fiscal developments, the general government deficit narrowed substantially in the first quarter of 2016 when compared with a year earlier. The deficit on the cash-based Consolidated Fund also narrowed in the first five months of the year, due to an increase in tax revenue and lower capital expenditure. On the external side, the surplus on the current account of the balance of payments narrowed in the first quarter of 2016.