Dynamic growth and low unemployment were being forecast for the Maltese economy, which maintained a healthy momentum with GDP growth estimated to have reached 3.3 per cent last year , the European Commission said in its winter economic forecast.

According to the forecast, GDP growth should moderate somewhat by 2016 but remain strong relative to the rest of the euro area.

The EU said HICP inflation was estimated to have bottomed out last year and should gradually recover in 2016 while the favourable macroeconomic climate should help the budget deficit fall below two per cent of GDP.

According to the forecast, real GDP growth rose in the third quarter last year to reach 3.8 per cent in annual terms, up from 3.4 per cent in the second quarter.

This reflected strong domestic demand, underpinned by dynamic investment in the energy sector and favourable labour market developments, and to a lesser extent exports, which, albeit weak, continued to outpace imports.

Real GDP growth, which was estimated to have reached 3.3 per cent last year, is expected to remain stable this year and moderate somewhat by the end of the forecast horizon, reaching 2.9 per cent in 2016.

The forecast in full can be read here.

In a reaction, Finance Minister Edward Scicluna said the European Commission was projecting a sustained fall in both the deficit and debt ratios, thus boding well for the upcoming Excessive Deficit Procedure decision.

"Indeed, the Commission remarks that it is expecting that the budget deficit figures for Malta to continue decreasing, to reach rates below 2% in 2016, levels which have not been experienced over the last two decades," he said.

He noted that the Commission also confirmed that general government debt ratio would decrease to 68.6% of GDP in 2014, and was expected to decrease further to 68.0% in 2015, reaching 66.8% by 2016, thus confirming its confidence in the Government’s fiscal plan.