Central Bank of Malta governor Josef Bonnici feels now is the right time to have “fiscal buffers that could act as a cushion against any future need”.

He reiterated his call for structural reforms and productive public investment as he gave the economy the thumbs up.

Addressing the annual dinner of the Institute of Financial Services yesterday, Prof. Bonnici welcomed the government’s drive to exploit the growth potential of the health and education sectors and transform them into “exportable services”.

“Malta has the ability to develop a regional cluster in these areas, attracting students and patients from the region and beyond,” he said.

The economy was vibrant and showed remarkable resilience

Describing Malta as a meeting point of cultures and languages, Prof. Bonnici said the island had the potential to further develop economic activities that exploited its location – “our strengths in doing business from Malta and that add value to current activities, such as… developing further cultural niches in the tourism sector so as to maintain a vibrant and evolving economy”.

The economy was “vibrant” and showed “remarkable resilience” in the face of the unstable economic environment elsewhere, he noted. Malta had the most open economy of all members of the euro area, having exports and imports each over 150 per cent of GDP. “Despite this challenging factor, the economy has managed to outperform its peers with GDP growth consistently above that of the euro area average,” Prof. Bonnici said.

Employment with the private sector also exhibited growth, averaging above three per cent over the past three years. He said labour costs had increased, attributing this to the economy’s shift towards the services sector, which engaged higher quality employees.

“Although this could increase unit labour costs, it does not necessarily imply a loss of competitiveness,” he said.

Prof. Bonnici said the latest inflation rate, standing at 1.6 per cent, was within reach of the European Central Bank’s “below but close to two per cent” target and confirmed the economy’s buoyancy.

He said the ECB’s monetary policy had enabled significant reductions in lending rates across the euro area, adding that although bank lending rates in Malta had gone down, they “still remain higher than those of other euro area countries”.