Malta is set to continue opposing international trends, recording robust economic growth and outperforming major economies, according to a new PwC Malta report.

The findings were recently published in PwC Malta’s Economic Outlook for 2024, which provides insights into global economic trends and projects for the coming fiscal year.

The report indicates that Malta is projected to register GDP growth of 4.4 per cent in fiscal year (FY) 2024, decelerating from the 5.6 per cent recorded in the previous fiscal year.

This comes despite the report stating that a number of major economies, including the United States, Japan, Italy, and France will be experiencing a decline in their GDP growth rates. The euro area is expected to maintain relatively flat growth in FY24, followed by a modest increase to 1.5 per cent projected for FY25, once interest rates start to decline.

However, the report added that Malta’s growth trajectory is expected to align more closely with the average growth of the euro area in the near future.

In a finding that echoes the results of the Central Bank of Malta’s (CBM) forecast from February, domestic consumption is the largest contributor to GDP in Malta. It outperformed headline economic growth in FY22 and FY23, following weaker years in FY20 and FY21. Despite this, the report highlighted how, when accounting for inflation and population growth, real consumption per capita remains more or less flat compared to 2019.

Additionally, the study acknowledged that inflation remains a “significant concern,” both globally and within Malta. Inflation is expected to decrease in the European Union (EU) and globally in 2024, yet Malta’s inflation rate, while dropping from 5.6 per cent to 2.9 per cent, is still anticipated to remain above the EU average of 2.7 per cent. This is primarily driven by food and service price inflation.

The report attributed Malta’s inflationary pressures in 2023 predominantly to increases in the prices of food and non-alcoholic beverages, together with service-related expenses.

In a bid to challenge these issues and control the prices of essential food products, Government introduced the “Stabbiltà fil-Prezzijiet” scheme in January, with it coming into effect last February. The scheme, signed by essentially all major retailers in Malta, dropped the prices of over 400 products across 15 categories by 15 per cent. This measure will remain at that level until the next Government Budget in October 2024.

PwC Malta’s analysis mapped the food types covered onto the official food subcategories as specified by Eurostat, and also accounted for the fact that the selected products which feature in the scheme represent only a portion of the brands available to consumers.

With this considered, the analysis suggested that the scheme could potentially result in a downward contribution to inflation in 2024, amounting to around 0.31 percentage points if implemented for the full year.

In addition to this, preliminary data for the first few months of 2024 indicated a decline in economic sentiment in some sectors, aligning with forecasts of a slowdown in GDP growth. Furthermore, while inflation has continued to moderate in the first two months of the year, it remains above the euro area average and thus has some way to go before reaching a more stabilised level.

In order to read the full PwC Malta report, click here.