BusinessToday Previous Editions

2 NEWS 16.6.2022 THE Central Bank of Malta expects Malta's gross domestic product (GDP) to grow by 5.4% in 2022, 4.9% in 2023 and 3.8% in 2024. Compared to the Bank's previous projections, this rep- resents a downward revision of 0.6 per- centage point in 2022 and 0.4 percent- age point in 2023. e downward revision reflects the deterioration in the international eco- nomic environment due to the Russian invasion of Ukraine and the lockdown measures in Asia. ese headwinds have weakened glob- al trade and have exacerbated supply chain disruptions and shortages of key vital inputs. Such disruptions have also increased imported price pressures. Net exports are expected to be the main driver of growth in 2022, reflect- ing the correction in import-intensive investment outlays from the exception- al levels reached in 2021. e contribution of domestic demand is expected to be positive but signifi- cantly lower compared to that of the previous year. In the following years, domestic demand is expected to lead the expansion in economic activity, reflecting especially a foreseen strong contribution from private consump- tion. At the same time, the contribution of net exports is projected to remain pos- itive, reflecting the gradual normalisa- tion of tourism exports and growth in foreign demand more generally. Employment growth in 2022 is expect- ed to reach 2.9% from 1.6% in 2021. It is set to moderate to just below 2% by 2024. e unemployment rate is pro- jected to decline to 3.3% this year, from 3.5% last year and it is expected to hover within this range over the outlook pe- riod. In view of the expected increase in in- flation this year, wage growth is project- ed to be relatively strong as employees might demand some partial compensa- tion for the increase in prices. Nevertheless, nominal wage growth is projected to remain below that of infla- tion due to some lag in the transmission from prices to wages. In the following years, wage pressures are expected to moderate as the labour market becomes less tight. Annual inflation based on the Har- monised Index of Consumer Prices is projected to accelerate to 5.0% in 2022, from 0.7% in 2021. e sharp pick-up in inflation reflects a broad-based increase across all sub-components of HICP ex- cept for energy inflation. Import price pressures are expected to moderate somewhat by the beginning of next year, although these are envisaged to remain high by historical standards. HICP inflation is expected to moderate to 2.9% by 2023, driven by lower contri- butions from all subcomponents except for energy inflation. Inflation is set to ease further in 2024, to 1.8%. e general government deficit-to- GDP ratio is projected to recede to 5.6% of GDP in 2022, from 8.0% in 2021. It is expected to narrow further to 4.0% of GDP in 2023, and to 3.2% of GDP in 2024. is profile is driven by the unwind- ing of COVID-19 support measures in 2022, which should offset outlays on price mitigation measures. e general government debt-to-GDP ratio is pro- jected to stand at 58.7% of GDP in 2024. On balance, risks to economic activity are to the downside for 2022 and 2023, and on the upside for 2024. ese risks stem from a possible prolongation of the Russia-Ukraine war. More persistent supply bottlenecks as well as higher input and transport costs, could adversely affect manufacturing output, private consumption, and in- vestment. Foreign demand could also be weaker than expected if monetary policy in ad- vanced economies responds more for- cibly to inflation than assumed in this baseline. ese downside risks could be miti- gated somewhat by possibly more ex- pansionary domestic fiscal policy, an earlier resolution of the war, as well as the possibility of a faster drawdown of domestic private savings. Risks to inflation are on the upside during the entire projection horizon. Indeed, the prolongation of the war, as well as China's zero-COVID poli- cy, could increase commodity prices further and exacerbate imported price pressures and costs. Finally, wage pres- sures could be stronger than expected if high inflation persists for a longer pe- riod. On the fiscal side, risks mainly relate to a larger deficit in 2022 and 2023. ese mostly reflect the likelihood of additional Government support to mit- igate rising commodity prices and State aid to Air Malta. Outlook for the Maltese economy 2021-2024 APS Bank announces IPO allocation policy Central Bank of Malta Pja zza Ka stil ja , Va lle tta VL T 1 0 6 0 , M A L T A T e l: ( +3 5 6 ) 2 5 5 0 7 5 0 1 measures in 2022, which should offset outlays on price mitigation measures. The general government debt-to-GDP ratio is projected to stand at 58.7% of GDP in 2024. On balance, risks to economic activity are to the downside for 2022 and 2023, and on the upside for 2024. These risks stem from a possible prolongation of the Russia- Ukraine war. More persistent supply bottlenecks as well as higher input and transport costs, could adversely affect manufacturing output, private consumption, and investment. Foreign demand could also be weaker than expected if monetary policy in advanced economies responds more forcibly to inflation than assumed in this baseline. These downside risks could be mitigated somewhat by possibly more expansionary domestic fiscal policy, an earlier resolution of the war, as well as the possibility of a faster drawdown of domestic private savings. Risks to inflation are on the upside during the entire projection horizon. Indeed, the prolongation of the war, as well as China's zero-COVID policy, could increase commodity prices further and exacerbate imported price pressures and costs. Finally, wage pressures could be stronger than expected if high inflation persists for a longer period. On the fiscal side, risks mainly relate to a larger deficit in 2022 and 2023. These mostly reflect the likelihood of additional Government support to mitigate rising commodity prices and State aid to Air Malta. This publication also includes a box that outlines the recent and projected developments in food prices. 2022 2023 2024 GDP growth (% yoy) 5.4 4.9 3.8 Inflation rate (% yoy) 5.0 2.9 1.8 Unemployment rate 3.3 3.4 3.5 General Government budget balance (% of GDP) -5.6 -4.0 -3.2 General Government Debt (% of GDP) 58.4 58.5 58.7 More details on the Bank's latest projections can be found here. APS Bank plc is pleased to announce the Allocation Policy in respect of applications received for its Initial Public Offering (IPO) of 110,000,000 new shares (including the 10,000,000 new shares issued as a result of over-allotment), at the price of €0.62 per share. As explained in the Prospectus and al- ready announced, an aggregate amount of 69,681,981 shares were pre-allocated to cer- tain investors pursuant to Pre-Allocation Agreements between the Bank, the Registrar and each relevant Applicant and/or Author- ised Intermediary. e remaining balance of 40,318,019 shares, comprising those under the over-allotment option, was made available for subscription by Preferred Applicants and the General Public, attracting applications for a total of 101,611,740 shares. In determining the allocation criteria, the Board of Directors considered that all appli- cations should be met in a way that ensures smaller investors are not crowded out of the investment process. For this purpose, a scaling down of Preferred Applicants in favour of the General Public was also required so that a balanced allocation outcome would be reached. 516 applications for a total of 15,578,761 shares were received from Preferred Appli- cants. Of these, applications up to and in- cluding 25,000 New Shares will be satisfied in full and for applications above 25,000 New Shares, they will receive up to the first 25,000 New Shares in full and 50% of the balance. Overall, 72.86% of the total amount applied for by Preferred Applicants will be satisfied and allocated. e General Public submitted 4,430 applica- tions for a total of 86,032,979 shares. e Bank shall be satisfying all applications up to and including 5,000 New Shares in full; and for ap- plications above 5,000 New Shares, they will be receiving up to the first 5,000 New Shares in full and 13.5139% of the balance. Overall, 33.67% of the total amount applied for by the General Public will be satisfied and allocated. e shares will be listed on the Malta Stock Exchange on Friday 17 June 2022 and trad- ing will commence the next business day, i.e. Monday 20 June 2022.

• Cover