Government spending shot up by 11.8 per cent in May, compared to May of 2016, according to the Central Bank’s July Economic update.
The Central Bank said that this rise was driven by higher spending on programmes and initiatives, which was buoyed by outlays on Malta’s EU presidency, health and ex-gratia refunds on motor vehicle registrations tax.
Personal emoluments and capital expenditure also contributed to the increase, the Central Bank explained.
Over the same period, revenue grew by two per cent. The Central Bank said this was mainly driven by higher inflows from direct tax.
Retail sales and tourism expanded
In particular, income tax revenue rose by €11.7 million. This improvement was mostly offset by a fall in non-tax revenue, which in turn resulted from a lower intake of EU grants.
The cash-based consolidated fund balance showed a small deficit in the first five months of 2017, as interest payments exceeded the primary surplus.
The Central Bank’s Business Conditions Index (BCI) edged down in June of this year, signalling slightly below average activity levels.
However, the Central Bank said economic sentiment had risen marginally over the month, as improved sentiment in construction, industry and among consumers offset weaker sentiment in the services and retail sectors.
In May, retail sales rose in annual terms. Tourism activity also expanded further. In contrast, industrial production decreased slightly over May 2016.
According to the Central Bank, labour market conditions remained favourable, as employment continued to grow and the number of registered unemployed declined further.
Price pressures remained moderate, with the annual rate of inflation based on the Harmonised Index of Consumer Prices (HICP) at 1.1 per cent in May and 1.0 per cent in June.
Maltese residents’ deposits rose at an annual rate of 10.6 per cent, while credit to residents increased by 1.3 per cent.
The Central Bank said preliminary customs data showed the merchandise trade deficit climbed to €501.5 million in May, a widening of €251.6 million from last year. This was due to exports contracting while imports increased, the bank said.