Issue link: https://maltatoday.uberflip.com/i/1511621
3 NEWS 16.11.2023 FROM PAGE 1 Despite this, Malta tops the rank- ing in employment growth, with 3.7% growth. is increase in employment is being fuelled by strong labour de- mand, especially in tourism and ad- ministrative services. According to the forecast, energy prices and supply bottlenecks were at the root of the recent inflation surge. But in Malta, non-energy imports were an important factor driving price in- creases. A breakdown of Malta's prices shows inflation between 2019 and 2022 was driven by non-energy imports and do- mestic unit profits and taxes. Higher inflation in Malta led to de- celerated private consumption and decreased investment, although the forecast notes a surge in aviation sec- tor investment in 2022. Despite government measures to cap consumer energy prices, the European Commission is still projecting inflation for 2023 to reach 5.7%, moderating to 3.3% in 2024 and 3.1% in 2025. Economic growth Malta's economic growth is expected to moderate from 6.9% in 2022 to 4.0% in 2023 as the effects of the post-pan- demic consumption and investment rebound expire. Despite higher inflation, private consumption already achieved 5.2% growth in the first half of 2023 and no further slowdown is expected as retail sales growth remain positive. e tourism sector continues to re- bound strongly, already exceeding the pre-pandemic levels, with further growth prospects in 2024 and 2025. Investment in 2023 is expected to de- cline by more than 20% due to the ex- ceptional growth of 2022 related to the acquisition of aircraft. is also drives the corresponding fall of imports. Information from the main industries suggest further rebound in exports. Net exports are set to be the main contributor to GDP growth in 2023, with consumption being the main driver in 2024 and 2025. Real GDP is forecast to continue to grow at 4.0% in 2024, accelerating slightly to 4.2% in 2025. Employment Malta is expected to maintain a high pace of employment and population growth, a key factor driving the out- look for consumption despite the ex- pected weak recovery in real wages. Employment increased by an impres- sive 6.2% in 2022 and continued to grow very strongly in the first half of 2023, fuelled by strong labour demand which increased across all sectors of the economy, both public and private, and was especially strong in tourism and administrative services. e labour force is set to continue growing at a robust pace in 2024 and 2025 in line with population growth as the country continues to attract for- eign workers. Malta's unemployment rate fell to 2.9% in 2022 and is expected to fall further to 2.7% in 2023, 2024 and 2025. Deficit Meanwhile, the government deficit will decrease over the coming years, but still remain above the 3% target from the Stability and Growth Pact. In 2023, the budget deficit decline is primarily driven by the reduction of the net budgetary cost of measures to mitigate the impact of high energy prices, accounting for 1.6% of GDP and down from 2.3% in 2022. Growth in compensation of employ- ees and social benefits slower than nominal GDP growth is also expected to contribute to the deficit reduction. In 2024, the expected phasing out of the costs related to the national airline is the main factor determining the re- duction of the deficit. Social benefits and intermediate con- sumption expenditures are expected to grow slower than nominal GDP growth, thereby contributing to the re- duction of the deficit. Conversely, the net budgetary cost of energy-related measures is projected to increase again, to 2.0% of GDP in 2024. Interest expenditures are also ex- pected to increase. In 2025, the reduction of the deficit to 4.1 % of GDP is set to be driven by the decline of the net budgetary costs of energy related measures (forecast at 1.0% of GDP in 2025) and interme- diate consumption expenditures, but partially offset by an increase in gross fixed capital formation and interest expenditure. e contained growth of social benefits is also expected to con- tribute to lowering the deficit ratio. e government debt-to-GDP ratio is set to increase to 53.3% in 2023, to 55.8% in 2024 and to reach 57.2% in 2025 as the primary balance, i.e. the budget balance net of interest expend- iture, is set to remain negative despite the high GDP growth rates. Malta tops EU ranking in employment growth AS part of its efforts to further strength- en the Maltese semiconductor ecosys- tem, Malta Enterprise held a series of technical meetings in Brussels with the specific objective of setting up a Malta microchips Competence Centre. e meetings served to consolidate Malta Enterprise's relationships with EU and research institutions and to discuss a number of key dossiers crucial for Malta. Malta Enterprise is actively engaged in providing feedback to the Government on industry related proposals such as the European Chips Act, the Net Zero Industry Act, the Critical Raw Materials Act and the Foreign Subsidies Regula- tion. e budget measure that establishes the Malta Competence Centre comes out of the background negotiations on the European Chips Act. e Europe- an Commission through the European Chips Act will be co- financing Compe- tence Centres in each Member State. After meetings held with the Europe- an Commission, Malta Enterprise CEO Kurt Farrugia said that "Malta Enter- prise is spearheading the establishment of the Malta Competence Centre that will be further future-proofing the Mal- tese semiconductor ecosystem and com- plementing the Industry 4.0 investment taking place through our first Important Projects of Common European Interest (IPCEI) at our largest manufacturing Foreign Direct Investment facility." Technical meetings held to strengthen Maltese semiconductor ecosystem Malta Enterprise delegation with the European Semiconductors Industry and with DG Connect paving the way for the setting up of a Malta Competence Centre