23/01/2017

Central Bank of Malta Quarterly Review – First Issue 2017

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

The Review also includes articles on a real-time index of business conditions for the Maltese economy and on an indicator which assesses whether residential property prices are in line with economic fundamentals. In addition, this edition presents the results of the latest Household Finance and Consumption Survey (HFCS) and provides a general overview of the forecasting process followed by the Bank to generate medium-term macroeconomic projections. The Review also carries a speech that the Governor delivered at the 2016 Annual Dinner of the Institute of Financial Services.

Over the review period, the Maltese economy was one of the fastest growing countries in the euro area, with real gross domestic product (GDP) rising by 3.0% on an annual basis. This rate of growth was almost double the rate observed in the euro area as a whole. Labour market conditions remained favourable and inflation, measured by the Harmonised Index of Consumer Prices (HICP) remained low from a historical perspective, standing at 0.9% in September.

Residents' deposits continued to grow at a fast pace in annual terms. At the same time, the low level of interest rates contributed to a further shift towards overnight deposits. Interest rates on deposits and loans to Maltese residents fell further during the third quarter, as did yields on Treasury bills and government bonds.

As regards fiscal developments in Malta, during the September quarter, the general government deficit narrowed on the same period of 2015. When measured on a four-quarter moving sum basis, the balance showed a surplus equivalent to 0.6% of GDP. The debt-to-GDP ratio reached a low of 60.4% of GDP.

The Review also looks at recent monetary policy decisions, noting that against a background of moderate growth and weak price pressures in the euro area, the Governing Council of the European Central Bank (ECB) kept key interest rates unchanged during the review period. It also confirmed that asset purchases will continue at a monthly pace of €80 billion until at least the end of March 2017. In December, the ECB announced that from April 2017 the monthly pace of such purchases will be reduced to €60 billion, with purchases continuing until at least the end of December 2017.

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

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