10/05/2017

Central Bank of Malta Quarterly Review – Second Issue 2017

The Central Bank of Malta has published the second issue of its Quarterly Review for 2017, which analyses economic and financial developments in Malta and abroad during the fourth quarter of 2016.

The Review also includes an article on a Dynamic Stochastic General Equilibrium (DSGE) model for the Maltese economy. Another article updates a 2015 study by the Bank on linkages between different industries. This edition also presents a comparison of the latest Household Finance and Consumption Survey results for Malta with those of other EU participating countries.

During the last quarter of 2016, real gross domestic product (GDP) in Malta grew by 5.1% year on year. This rate of expansion was three times that registered for the euro area as a whole. Positive labour market developments continued, as employment grew further and unemployment continued to decline.

The annual rate of inflation, measured by the Harmonised Index of Consumer Prices (HICP) rose marginally over the quarter, standing at 1.0% in December. Inflation in Malta remained low from a historical perspective and for the first time in over two years, the December figure was also below that registered in the euro area.

Monetary dynamics remained robust during the fourth quarter of 2016. Residents' deposits with monetary financial institutions operating in Malta continued to expand in annual terms, reflecting strong growth in overnight deposits. The annual rate of change of credit to residents of Malta accelerated, driven by faster growth in credit to residents outside the general government sector.

With regard to fiscal developments, in the last quarter of the year, the general government surplus increased when compared with the corresponding period a year earlier, as expenditure fell faster than revenue. When measured as a four-quarter moving sum, the surplus was equivalent to 1.0% of GDP, up from 0.8% in the third quarter of 2016. General government debt as a share of GDP stood at 58.3% at the end of December, down from 59.7% three months earlier.

The Review also presents an overview of the monetary policy decisions taken by the Governing Council of the European Central Bank (ECB), which were motivated by continued economic growth and moderate price pressures. The Governing Council kept the key interest rates unchanged during the last three months of the year and extended its asset purchases programme (APP) until at least the end of 2017. The ECB also announced further changes to the parameters of the APP, with a view to ensure its smooth operation.

The second issue of the Quarterly Review for 2017 is available on the website of the Central Bank of Malta.

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