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7 Budget 2017 maltatoday, TUESDAY, 18 OCTOBER 2016 Growth forecasts for 2017 'feasible and achievable' – fiscal advisory council Malta Fiscal Advisory Council publishes its assessment of the Government's macroeconomic forecasts presented within the Draft Budgetary Plan for 2017 The Malta Fiscal Advisory Council (MFAC) presented its assessment of macroeconomic forecasts for the Mal- tese economy in the draft budgetary plan for 2017 – namely, a real GDP growth forecasts of 3.9% for 2016, and 3.5% for 2017 – "appear to be feasible and achievable". The MFAC said the finance ministry's expectation of a moderate deceleration in the pace of economic expan- sion, which follows the exceptional 6.2% real GDP growth registered in 2015, is considered to be a prudent approach. Likewise, the nominal GDP growth forecasts of 5.7% for 2016 and 5.8% for 2017, following the 8.6% nominal expansion of 2015, lie within the Council's endorsable range. "The Council observes that according to the ministry's projections, real GDP growth is expected to be mainly driven by domestic demand in both 2016 and 2017. On the other hand, the Council notes that net exports are expected to contribute only marginally to GDP growth in 2016 and to dampen GDP growth in 2017 as the expan- sion rate of imports of goods and services is projected to outpace that of exports. "The Council acknowledges that such pattern is consist- ent with the anticipated trajectory for robust gross fixed capital formation, which in the case of Malta generally entails a high import content. Export growth, which is expected to decelerate marginally in 2016 and pick up again in 2017, appears to be achievable, as it is consistent with the profile for the international assumptions as well as being comparable with recent developments." The MFAC said anticipated labour market conditions and the expected developments in real disposable income sustain the plausibility of the forecast growth rates in real private consumption. The forecast employment growth and the low unemployment rate appear to be consistent with the recent trends observed in the labour market and the government's active labour market policies imple- mented in this area. "While the Council considers the latest macroeconomic projections as generally cautious and achievable, they are still subject to possible risks, as is inevitable in any fore- casting exercise. "In particular, the actualisation of the projected GDP growth depends to a large extent on the ability of private consumption expenditure to maintain its strong mo- mentum over the forecast period as well as the degree on implementation of the planned investment projects. Moreover, the external GDP components may be rather volatile and highly conditioned by evolving developments in Malta's main trading partners. However, the Council's assessment is that the upside and downside risks appear to be broadly balanced." The Council welcomed the efforts to strengthen the ro- bustness of its forecasts through the development of sup- plementary econometric models and the compilation of supportive information. "This is particularly important since notwithstanding the exceptionally high rate of real growth registered for gross fixed capital formation in 2015, which thus creates a large base effect, investment growth is expected to be positive in 2016 and to acceler- ate in 2017. The Council understands that the forecast in- vestment profile is based on the outlays related to specific large identifiable investment projects which have a high probability to take place during 2016 and 2017, thereby mitigating the possible downside risks to this forecast." The full report – "An Assessment of the Macroeco- nomic Forecasts for the Maltese Economy prepared by the Ministry for Finance in October 2016" – is availa- ble on the website of the MFAC http://www.mfac.gov.mt Nominal GDP growth forecasts of 5.7% for 2016 and 5.8% for 2017, following the 8.6% nominal expansion of 2015 lie within the Council's endorsable range Fiscal advisory council assessment