Record economic growth last year was driven by investment that registered double-digit growth and higher private consumption, the Central Bank of Malta said.
Economic growth at 6.3 per cent in 2015 was described as historic by Central Bank governor Josef Bonnici yesterday at the publication of the annual report.
The exceptional growth rate was in part driven by the massive investment in the new gas power station.
In its projections for this year and the next, the Central Bank expects GDP growth to reach five per cent and 4.2 per cent respectively. In both cases, economic performance is expected to be above the EU average.
The flipside of last year’s GDP growth was a drop in net exports of 0.6 per cent, which registered a negative contribution for the first time since 2010.
However, industrial production increased by almost six per cent in 2015, reversing a contraction of similar size the year before.
Prof. Bonnici said resilience was borne out of a diversified economy that saw the services sector making a “strong” contribution.
Tourism maintained its positive trend with 1.8 million visitors in 2015, an increase of six per cent over the previous year.
The construction industry continued on its path to recovery with a higher number of permits being issued and business sentiment in the sector turning positive for the first time in eight years.
Prof. Bonnici said the strong pace of economic expansion was reflected in the labour market as employment continued to increase and unemployment dropped.
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 this year, 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 for domestic consumers would have worked themselves through the statistics.
‘Bank charges still too costly’
Josef Bonnici did not mince words yesterday when saying bank charges for electronic transfers were still too costly.
The governor of the Central Bank said the country needed a prudent banking system but it also needed a more competitive and efficient system.
He said the costs linked to electronic transfers were subsidising the prevalent cheque and cash culture, which came without charges and was more expensive to maintain.
“The solution should not be imposing a charge on cheques but reducing the charges on electronic transfers,” he said.
The Central Bank is throwing its weight behind the Consumer and Competition Authority, which last year listed a number of recommendations to address the lack of competition and high charges in the banking sector.
Speaking at the unveiling of the Central Bank’s Annual Report 2015, Prof. Bonnici urged domestic banks to “move with the times” by reducing the costs of transactions.
He also addressed the issue of lending rates for small and medium enterprises, which were still too high despite having dipped throughout 2014 and 2015.
The creation of a development bank could go a long way to absorb the higher risk linked to smaller operators while stimulating investment in the sector, Prof. Bonnici said.