The European Commission is forecasting slower economic growth for Malta for the next two years.

The island currently has one of the highest economic rates of the 28 member states.

In its latest forecast of the Maltese economy, the European Commission said that, while real GDP growth was forecast to reach 4.9 per cent in 2015, it will be moderating to 3.9 per cent this year and will slide further to 3.4 per cent in 2017.

According to the EU executive, the current robust economic growth is boosted by the ongoing construction of the new power plant at Delimara and the injection of millions of EU funds in the Maltese economy last year, but their effect will dwindle in 2016 and 2017.

“Growth is expected to moderate in 2016 and 2017 with the phasing out of the major investment projects,” the Commission said.

Although the economy is predicted to slow down, the cost of goods and services is expected to rise. Inflation is forecast to return to above two per cent by 2017 on the back of higher energy inflation, with the Commission warning that inflation would be “among the highest in the euro area over the forecast horizon”.

According to the forecast, job creation is expected to remain stable while unemployment should remain low.

The Commission reported progress in Malta’s efforts to curb its deficit and debt levels. This year the deficit is forecast to further decrease to 1.1 per cent of GDP.

From 66.9 per cent of GDP in 2014, the debt ratio was also projected to fall further in 2015 to 64 per cent of GDP, also thanks to the expected repayment of tax arrears from Enemalta. Debt is expected to continue its downward path to reach 58.7 per cent by 2017.

On an EU level, the Commission’s forecast is projecting an increase in economic growth, although at a much slower pace than Malta’s. The European economy is now entering its fourth year of recovery and growth is continuing at a moderate rate, driven mainly by consumption.

In the eurozone, growth is projected to increase to 1.7 per cent this year from 1.6 per cent last year and to climb to 1.9 per cent in 2017.