Malta Economic Outlook
Annual economic growth cooled in the second quarter from the first due to weaker domestic demand. Available data hints at resilient activity in Q3. The unemployment rate ticked up but remained below 3.0% in the quarter. Moreover, in the same period, inbound tourist numbers were up by around 20% year on year. Additionally, economic sentiment averaged higher in Q3 compared to the previous period. That said, rising interest rates, shrinking imports and subdued industrial activity are likely dragging on growth. On the fiscal front, figures for January–September indicate that the budget recorded a significantly narrower deficit compared to the same period of last year. The improvement was mainly due to a strong increase in revenue from income taxes.
Harmonized inflation fell to 4.3% in October from 4.9% in September, mainly due to softer increases in prices for food and housing and utilities. Inflation should average lower in 2024 than this year, thanks to a tough base effect and the lagged effects of higher interest rates. Commodity price spikes pose an upside risk to the outlook.