The relocation of financial services operators from London as a result of Brexit could boost Malta’s GDP, particularly in 2019, according to the Autumn Economic Forecast published today by the European Commission.

The EU projected that Malta's real GDP growth is forecast to be 5.6% this year, 4.9% next year, and 4.1% in 2019, it said.

The Commission also said that growth in the near term could be boosted by a faster realisation of planned infrastructure projects.

The forecast said that the influx of foreign workers was strongly boosting supply of labour, which was why the very low unemployment rate was not driving up wages. However, it warned that as the increase in labour supply moderated, wages would go up, and that these would rise than the eurozone average, in spite of productivity gains.

The larger population, growing disposable income, improved consumer confidence and resulting lower savings rate were all driving private consumption, seen as the main driver of growth.

On the other hand, the bonanza from the citizenship scheme would eventually taper off, slowing down revenue growth.

The Commission said that, assuming there were no policy changes, the government would be able to record a Budget surplus of 0.5 per cent of GDP in 2018 and 2019, down from 0.9 per cent in 2017,

“Risks to the fiscal outlook are balanced as higher current expenditure and related slippages in budgetary execution could be compensated by higher proceeds from the citizenship programme,” it concluded.

Malta welcomes EU projections

Addressing a press conference, Finance Minister Edward Scicluna welcomed the findings, which he said corresponded with government’s own forecasts.

The European forecast, he said, showed that the current surplus was sustainable and the overall strength of the economy.

He also highlighted the fact that the ‘Brexit effect’ was forecast to be positive for Malta, which he attributed to Malta’s close relations with Britain. The island, he said, was in a position to offer itself as a ‘co-location’ base in the EU for UK companies after Brexit.