GDP growth expected to slow
The Central Bank expects a slowdown in Malta’s GDP growth in the coming months as a result of an expected weakening of domestic demand. The latest projection is made in the second issue this year of the bank's Quarterly Review. The Review notes that...
The Central Bank expects a slowdown in Malta’s GDP growth in the coming months as a result of an expected weakening of domestic demand.
The latest projection is made in the second issue this year of the bank's Quarterly Review.
The Review notes that growth maintained a steady pace during the first three months of the year, with GDP expanding by 3.5% on a year earlier, spurred by buoyant domestic demand, particularly consumption and inventory accumulation. On the other hand, net exports contributed negatively to growth, as exports fell at a faster pace than imports.
On inflation, the Review observes that, as in the rest of the euro area, inflation in Malta accelerated further, with the annual percentage change in the Harmonised Index of Consumer Prices rising from 3.1% in December 2007 to 4.3% in March 2008. The persistent rise in the prices of food items was the main factor behind this increase.
Meanwhile, in the labour market, conditions remained buoyant with employment growth remaining strong and unemployment falling.
The Review notes that the Central Bank’s survey on the perceptions of business operators in the service and construction industries revealed a pick-up in second quarter performance, with almost half of respondents quoting higher turnover than in the first quarter. Cost pressures, however, increased during the second quarter and were reflected in higher selling prices.
The bank said house prices were estimated to have declined by 0.7 per cent lower in the first three months of the year, compared to the same period last year. The decline was mostly limited to maisonettes and apartments.
On competitiveness the Review highlights recent developments in key indicators, namely unit labour costs and the Harmonised Competitiveness Indicator compiled by the ECB. On the basis of these indicators, Malta’s overall international competitiveness appeared to have deteriorated moderately over the year up to March 2008, despite an improved standing against the rest of the euro area.