VALLETTA, Dec. 16 -- The Central Bank of Malta has revised upward its economic growth projection, buoyed by better-than-expected data following benchmark revision in national accounts, particularly in 2023.

In its economic forecast published Monday, the bank projects Malta's gross domestic product (GDP) to grow by 4.9 percent in 2024, a slight increase from the previously forecast 4.4 percent. Growth is expected to moderate to 3.9 percent in 2025, 3.6 percent in 2026, and 3.4 percent in 2027, reflecting a gradual return to potential output.

The report attributes the growth to strong domestic demand, saying that private consumption is set to expand significantly, supported by reduced income tax burdens. Private investment is also expected to rebound gradually after a sharp contraction in 2023, spurred by sector-specific challenges, notably in aviation.

The contribution of net exports is expected to remain positive but less impactful compared to domestic demand, the bank said.

Employment growth was set to moderate, albeit from high rates, with the unemployment rate remaining marginally above 3 percent, it noted, adding that wages are expected to grow faster in 2024, partly in response to past inflationary pressures and a tight labor market.

Annual inflation, measured by the Harmonised Index of Consumer Prices, is projected to drop significantly from 5.6 percent in 2023 to 2.5 percent in 2024. It is projected to reach 2 percent by 2026. The 2025 inflation forecast has been slightly revised upward by 0.1 percentage points due to wage-sensitive components and increased consumption.

The Central Bank also noted the likelihood of higher-than-expected growth in tax revenue in 2024, attributed to improved efficiency in tax collection mechanisms.

  - Xinhua