The Maltese economy isgrowing strongly, but positive economic growth cannot be taken for granted, an International Monetary Fund report warned yesterday.
According to the preliminary findings of IMF staff on an official visit, Malta has remained resilient in the face of global shocks.
Malta stood firm in the face of global shocks, and the reliance on domestic funding and the relatively well-diversified economy have helped preserve stability.
Boosted by large-scale infrastructure investments, low oil prices, a weaker euro, direct income tax cuts and recent reform efforts, growth accelerated to 5.1 percent in the first half of 2015 and unemployment was at historic lows, it said in a statement.
The outlook was meanwhile strong and risks were balanced: growth was expected to remain solid in 2016 and 2017, driven initially by domestic demand and later by a gradual recovery in external demand.
The IMF report also refers to “strong migration inflows”.
Malta has experienced large inflows since the early 2000s, the majority of which originated in other EU countries, which have offset Malta’s declining working-age population and raised potential growth.
Refugee inflows have also been significant but have declined since 2013. The planned agency for refugees should help enhance coordination between institutions to ensure the smooth integration of refugees into the labour market and society, the report continued.
According to these preliminary findings, there is now a window of opportunity to push ahead with mutually reinforcing reforms on multiple fronts. Raising medium-term growth will require building fiscal buffers, maintaining a healthy financial sector and sustaining structural reforms.
The authorities should ensure that the reform momentum continues and the measures taken so far are translated into outcomes.
Among others, the report mentions budgetary measures supporting female participation.
These have been paying off, particularly for younger cohorts, offsetting the adverse demographic trends and supporting potential growth.