Companies expected to start investing again after savings increased by €300 million
The Central Bank’s annual report is predicting that this year the Maltese economy will grow by 5% and that this growth will be sustained even next year. In an analysis of more than 150 pages, economists said that the sources of this growth will come from the money families and companies have saved during the pandemic. In fact, bank deposits increased by hundreds of millions of Euro.
The Governor of the Central Bank, Edward Scicluna, said that the pandemic caused a greater economic shock than the 2008 recession, pointing out that the blow could have been worse if various fiscal and monetary measures had not come into effect.
The report shows that last year, the national wealth decreased by 7% mostly because of a drop in exports. The domestic demand also registered a downturn because of the unprecedented level of fiscal support which among other things, avoided the further decrease of private consumption.
The Central Bank’s Chief Economist Aaron Grech, said that although there was some improvement, this year the deficit in the Government’s finances will remain rather high because of the financial assistance during the pandemic. Dr Grech explained that the national debt will still be controlled.
”We anticipate that between the gradual relaxation of economic measures and the gradual decrease of financial assistance and an increase in the GDP, which we are expecting, that we will have a stronger improvement in Government finances next year. National debt is expected to remain under 60% even next year.”
Economists with the Central Bank are predicting that this year the economy will grow by 5% and next year the growth will reach 5.5%. Dr Grech said that this year the domestic demand is expected to grow because people were saving more over the last year.
At the same time, even companies which last year postponed their investment, will this year start to invest once again because they too saved more. In fact, bank deposits increased by more than €300 million. At the same time the Government is expected to increase its capital investment and this will lead to investments increasing by almost 18% globally.
Asked about the tourist sector, Dr Grech said that this summer, tourism is capable of increasing by 50% from last year, however the level of tourists who came to Malta in 2019 is not expected to be reached before another two years.
The Governor of the Central Bank, Edward Scicluna, added:
”We were prepared in the sense that the banks were so strengthened by capital and the requirements they needed, that at least the biggest blow was on the tourism sector, and slightly less on other sectors, however the financial sector, despite the volatility of the market, was prepared and we compensated for this considerably with many measures which were introduced by the European Central Bank.”
In looking towards the future, the Central Bank will continue to closely analyse the economic situation while participating in discussions about the revision of monetary politics of the European Central Bank and contributing towards financial stability.