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maltatoday, WEDNESDAY, 3 MAY 2017 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Economic growth to slow down to 4.1%, Central Bank projects Tim Diacono Malta's GDP growth is expected to gradually slow down in the next three years, the Central Bank has forecast. In its annual report for 2016, the Central Bank predicted that GDP will grow by some 4.1% this year, down from 4.3% in 2016 and 6.2% in 2015. It is predicted to keep slowing down to 3.7% in 2018 and 3.3% in 2019. "Over the projection horizon as a whole, GDP growth is expected to be driven mainly by domestic demand. The contributions of domestic demand and net exports are heavily influenced by the path of investment, which is set to expand in 2016 and 2017, contract in 2018, and recover in the outer year," the report reads. "As a result, while domestic demand is expected to drive economic growth in the first two years of the projection horizon, its contribution is set to be marginal in 2018, before rising again in 2019. In contrast, net exports are forecast to contribute negatively in the first two years, but positively in 2018 and, to a lesser extent in 2019." Private consumption expenditure is also expected to grow at a smaller rate – from 4.3% in 2016 to 3.6% in 2017, 3.2% in 2018 and 2.8% in 2019. On the other hand, the rate of government consumption expenditure is expected to shoot up – from 3.1% in 2016 to 6.2% this year, before dipping again to 5.6% in 2018 and 3.7% in 2019. The Central Bank report also noted that bank deposits belonging to residents of Malta rose by €1.1 billion (6.7%) when compared with the previous year, following a 12.9% increase in the previous year. Households were the main driver behind the increase in total deposits, accounting for over 60% of the overall increase, with non-bank financial institutions accounting for most of the remaining 40%. The report also confirms that property prices continued to increase during the first three quarters of 2016 at an average annual rate of 5.2%, slightly faster than the 5% registered in 2015 as a whole. 'Proof of Malta's positive economic state' – government The government welcomed the Central Bank's report, and drew parallels with Malta's economic performance under the previous Nationalist administration. It said that economic growth in 2016 was double that recorded in 2012 and triple that recorded in 2011. Private consumption increased by 3.8% when it had decreased by 0.4% in 2012, while household deposits increased by €3.5 million in the past four years. "The Central Bank report is another positive certificate of our country's strong economic performance, in contrast with neighbouring countries." Alitalia starts bankruptcy proceedings Alitalia started bankruptcy pro- ceedings for the second time in a decade, throwing the survival of Italy's fl ag carrier in doubt af- ter workers rejected job cuts and concessions linked to a €2 billion refi nancing plan. Alitalia said in a statement that Italian shareholders and Etihad, the Abu Dhabi airline that owns 49% of Alitalia, had been "committed to recapitalise and finance the plan with 2bn euros", but that without the approval of workers, it could not go ahead. The company - which up to a few months ago was in talks with the Maltese government over the purchase of 49% of Air Malta - said its flight schedule would continue to operate as planned, while administrators examine whether the firm can be turned around. Alitalia has received more than €7 billion from the Italian state over the last decade. But without further support, it may end up permanently grounded. Last week, airline employees voted against a plan to cut jobs and salaries that would have allowed it to secure new funds. Under Italian law, the government will appoint supervisors to turn around the company or order its liquidation, and may provide stop-gap funds to maintain operations. Alitalia, which was mainly backed by Abu-Dhabi based Etihad Airways, last week said it had exhausted all options to stay solvent after workers nixed a plan involving 1,600 job losses. The cuts to its workforce of 12,500 employees may be even deeper under administration, as a rescue appears unlikely. Etihad said it won't extend additional funding. "It is clear this business requires fundamental and far-reaching restructuring to survive and grow in future," Etihad Chief Executive Officer James Hogan said in a statement. "Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest." Rome has given Alitalia a €400 million bridging loan to allow it to keep operating during the bankruptcy process. But Italy's finance minister has ruled out renationalising, or providing further funds for, the troubled carrier. And public opinion seems to be behind the decision. Italians have taken to social media in recent days calling for politicians to resist bailing the airline out again. An opinion poll published on Friday suggested 77% of Italians believe the airline should be left to fail. However, with an election looming next year, politicians may be reluctant to see Alitalia's 12,500 employees lose their jobs. Alitalia's board said that because of "the serious economic and financial situation of the company, of the unavailability of the shareholders to refinance, and of the impossibility to find in a short period of time an alternative", they had decided to proceed with the filing for extraordinary administration. The Central Bank has predicted that Malta's economic growth will gradually slow down