The Malta Fiscal Advisory Council has presented its assessment of the macroeconomic forecasts for the Maltese economy prepared by the Finance ministry as part of the Update of Stability Programme 2017 – 2020.
The council considered that on the basis of the information available to date, the official real GDP growth forecasts of 4.3% for 2017, 3.7% for 2018, 3.5% for 2019 and 3.4% for 2020 appeared plausible.
The ministry’s positive outlook for real GDP growth over the forecast horizon was compatible with the assumptions employed and the estimated economic relationships and was reasonably close to the forecasts published by local and international institutions.
The anticipated moderation of economic growth appeared prudent, compared to the higher real GDP growth rates which were recorded between 2014 and 2016. Likewise, the nominal GDP growth forecasts of 6.3% for 2017, and stabilising around 6% for the period 2018 – 2020, lay within the council’s endorsable range, it said.
The council said the possibility that the external conditions turned out different than expected would naturally pose upside or downside risks to the forecasts, particularly for exports and inflation.
It noted that the main drivers of economic growth varied across the years, with domestic demand being more important in 2017 and 2019, and external demand being the main contributor in 2018 and 2020.
The council acknowledged that the swings in the main sources of GDP growth across the years were due to the volatility in the forecast growth rate for the investment component, which in the case of Malta tended to have a high import content.
The council considered as plausible the forecasts for the external sector, which showed real exports growing faster than real imports in each year, making net exports a consistent source of growth along the forecast horizon. This was in line with the recent positive performance among key export sectors, as well as the external assumptions employed.
With regards to real private consumption, which was the largest component within the GDP, the trajectory of a gentle deceleration in growth throughout the forecast horizon – similar to the growth pattern projected for real GDP – was compatible with the view that the supportive economic conditions observed in recent years were likely to persist in the near term.
The council acknowledged that the forecast real growth rate for general government final consumption expenditure, characterised by a sharp acceleration in 2017 and a below GDP growth rate in 2018 and 2020, reflected the latest information available to the ministry.
The materialisation of this forecast was contingent on the government’s ability to adhere to its budgetary targets, particularly in terms of stringent expenditure controls as well as the attainment of the revenue targets.
The council concluded that, on balance, the risks to the forecasts were more on the upside particularly in view of the prudence shown in the assumptions underpinning the forecast estimates.The full report, entitled “Assessment of the Macroeconomic Forecasts – Update of Stability Programme 2017 – 2020”, is available on the
The full report, entitled “Assessment of the Macroeconomic Forecasts – Update of Stability Programme 2017 – 2020”, is available on the MFAC website.