The Central Bank of Malta is projecting economic growth to be five per cent this year on the back of strong domestic demand, governor Josef Bonnici said.

Although the growth rate is expected to be slower than last year, it still is “very healthy”, according to Prof. Bonnici.

Growth is expected to be 4.2 per cent in 2017, fueled by strong domestic demand. The growth rates for this year and the next will still be above euro area average.

When unveiling the annual report 2015, Prof. Bonnici said the economy showed “remarkable resilience” as real GDP grew by 6.3 per cent last year – a historic rate.

The main drivers were higher consumption and private investment, with the latter registering double-digit growth – primarily linked to the new power station investment. However, net exports were down for the first time in 10 years.

The CBM said the strong pace of economic expansion was reflected in the labour market as employment continued to increase. Although Malta still has the lowest female participation rate in the EU, between 2008 and 2014 it registered the highest growth with more potential for expansion.

An expanded labor market has also seen foreign workers make up 10 per cent of the work force, contributing some €100 million in taxes.

Inflation at 1.2 per cent in 2015 was above that of the euro area but still close to the European Central Bank target of two per cent. The Central Bank is forecasting inflation to remain unchanged in 2016, before increasing to 1.8 per cent in 2017.

Falling energy prices helped to keep inflation down, although this downward trend slowed down last year after the utility tariff reductions of 2014 would have worked themselves through the statistics.

Given the favourable economic environment that would see the government deficit and debt dropping further, Prof. Bonnici said this was an appropriate time for the introduction of fiscal buffers to cater for any future budgetary adjustment without breaching fiscal rules.