Malta narrows income gap with euro area

A European Central Bank publication on the EU candidate countries' preparations to join the eurozone lists Malta, Estonia and Hungary as the candidate countries that have managed to narrow their income gap with the euro area by around 10 per cent since 1995.

Other candidate countries, the ECB says, have not progressed in this regard, or even regressed.

The ECB says that however, real macroeconomic convergence means more than a catching up of income levels. It also includes adjusting the structures of the accession countries' economies to bring them more into line with those in the euro area as well as setting up the appropriate institutions and adopting international best practices in a number of areas. Encouragingly, the accession countries have made considerable progress in these areas.

The European Central Bank publication, "The Eurosystem's dialogue with EU accession countries", says that the overall picture of income convergence masks considerable differences between the accession countries.

The per capita Gross Domestic Product ranges from 26 per cent of the euro area average in Bulgaria to 88 per cent in Cyprus. That of Malta is 58 per cent. It was 49 per cent in 1995.

On inflation rates developments, the ECB says that despite progress, the inflation rate among candidate countries was on average about nine per cent, which is significantly higher than in the euro average area last year.

However, the figures produced by the ECB show that Malta's inflation rate last year was the third lowest among candidate countries after Cyprus and Latvia. The ECB says that the inflation rate in Malta last year was 2.9 per cent - only 0.4 per cent higher than the average euro area.

The European Central Bank says that candidate countries have made remarkable progress over the past years in marcoeconomic stabilisation, in integrating their economies through trade and financial relations with the euro area.

It says that the prospect of EU accession has thereby already served as a powerful anchor for economic, monetary and exchange rate policies and has guided policy makers as well as market participants.

It says that for the ECB, managing the accession process from a central banking point of view has become an institutional priority, and significant resources were committed to this task.

It said that in the period ahead, preparations will be intensified to ensure the smooth integration of accession countries' central banks.