Country Economic Forecasts > Malta

GDP grew by 4.8% in Q2 2015, up from 4.5% in Q1,underpinned by the strong labour market and low inflation supporting consumerdemand. Unemployment is about half the Eurozone average and tourism alsohas solid momentum, helped by ongoing recovery in the EU. The lower oil importbill has also supported the current account surplus. But offsetting this,capital goods imports have risen sharply due to energy sector projects. Lookingahead, the impetus from domestic spending is expected to fade, with investmentgrowth slowing from the double-digit surge of recent years and rising importseroding the contribution from net exports. We forecast GDP growth of 2.9% in2016 and then a further slowdown to about 2% a year in 2017-18. And a Grexitremains a risk; a Greek exit from the Eurozone with limited contagion wouldhave only modest effects, but a disorderly exit could dampen growth more eventhough Malta has a low debt burden by Eurozone standards. In July, S&Praised the outlook on Maltas BBB+ sovereign credit rating from stable topositive, citing good growth prospects and fiscal consolidation. We seegovernment revenues continuing to grow strongly, narrowing the fiscal deficit.However, the working age population is falling and reforms are needed to ensurethe long term sustainability of the public finances.