In Malta, the annual real GDP growth rate stood at 1.7 per cent in the second quarter of 2013, compared with 1.8 per cent in the preceding quarter, according to a supplement accompanying the second issue of the Central Bank of Malta’s Quarterly Review.

Growth was driven by changes in inventories, as net exports, private and government consumption and gross fixed capital formation declined on the previous year.

The supplement includes data which became available after the Review had been prepared, updating the original figures of 1.6 per cent and 1.7 per cent for the first quarter and last quarter of 2012 respectively.

Price pressures in Malta eased during the review period. Annual HICP inflation declined to 1.4 per cent in March from 2.8 per cent in December. This primarily reflected weaker price increases of services and of non-energy industrial goods. Meanwhile, price pressures from energy and food also abated. The annual HICP inflation rate moderated further in the second quarter of 2013, decelerating to 0.6 per cent in June.

Employment continued to rise during the first quarter of 2013, though at a slower pace compared with the previous quarter. The Labour Force Survey shows an annual increase in employment of 1.7 per cent, following a rise of 3.3 per cent in the preceding quarter. The unemployment rate remained unchanged at 6.1 per cent compared with a year earlier.

First-quarter indicators regarding competitiveness continued to show mixed results.

Both the nominal and real harmonised competiveness indicators increased further, as a result of the appreciation of the euro. Growth in unit labour costs, measured as a four-quarter moving average, eased to 3.1 per cent in the March quarter from 3.5 per cent in the last quarter of 2012.

During the quarter under review, the deficit on the current account of the balance of payments widened compared with the same period a year earlier. This was a result of higher net outflows on merchandise trade and lower net inflows on the services account. However, expressed as a four-quarter moving sum, the balance on the current account remained positive, standing at 0.7 per cent of GDP in the year to March 2013, as against a surplus of 1.2 per cent a year earlier.

The contribution of monetary financial institutions resident in Malta to the euro area broad money stock gathered momentum, with the annual growth rate increasing from 8.7 per cent in December to nine per cent in March. Deposits held by Maltese residents, as well as credit granted to them, grew at a faster annual rate than in the previous quarter, though lending to the private sector subsequently decelerated.

Turning to domestic financial markets, yields on three-month Treasury bills fell in both the primary and secondary market. Yields on five-year and 10-year government bonds also declined. The downward trend in yields persisted for most of the second quarter. Meanwhile, in the first half of 2013, the Malta Stock Exchange share index rose further.

On the fiscal front, the Review observes that in the first three months of the year the general government deficit widened on a year-on-year basis, as expenditure outpaced revenue. Measured over a 12-month period, the deficit stood at 3.6 per cent of GDP at the end of March, compared with 3.3 per cent in 2012.

The general government debt also rose, from 71.6 per cent in December to 75.4 per cent in March. During the first seven months of the year, the balance on the Consolidated Fund improved, however, with the shortfall narrowing by €74.3 million over the same period of 2012.

In the eurozone, during the first quarter of 2013, economic activity remained weak, with the annual rate of growth dropping to -1.1 per cent from -0.9 per cent in the previous quarter. This contraction was entirely driven by domestic demand, as net exports increased. Output also fell in relation to the previous quarter. However, the quarter-on-quarter growth rate turned positive in the second quarter, standing at 0.3 per cent. The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) eased further, reaching 1.6 per cent in June.

The second issue of the Quarterly Review for 2013 is available on the website of the Central Bank of Malta at www.centralbankmalta.org.

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