The Central Bank of Malta is predicting economic growth of 2.3 per cent in 2011, in contrast to the government’s forecast of three per cent. In 2010 Malta enjoyed a 3.2 per cent economic growth rate. The latest Central Bank Quarterly Review says: “In 2011 real GDP growth is projected to decelerate to 2.3 per cent, as growth in world trade is expected to lose momentum. The increase in economic activity is to be mainly driven by a further pick-up in domestic demand, underpinned by stronger investment. The latter is propelled primarily by a sharp increase in public investment related to the greater absorption of EU funds.

It adds: “However, growth in private investment is also forecast to accelerate as the downturn in the construction of dwellings is viewed to attenuate somewhat in 2011. Private consumption is also envisaged to gather pace on the back of further improvements in employment income.”

The latest Ernst & Young Eurozone Forecast for Malta also predicts a slowing in economic growth in 2011.

“Despite the Budget’s emphasis on investment, GDP growth will slow in 2011 due to weaker net export growth and the delay before rising private investment brings new capacity on stream. Stronger investment-led growth will resume in 2012,” the forecast had said. Ernst & Young says it expects growth to average 2.1 per cent in 2011, only slightly less than the Central Bank’s forecast, before accelerating towards three per cent in 2012.

However, the unrest in Libya and the rest of the Middle East, as well as the global impact of last week’s earthquake and tsunami in Japan could negatively affect Malta’s economic growth in 2011, many analysts believe.