Malta: 2022 Article IV Consultation-Press Release; and Staff Report

IMF Staff Country Reports, February 8, 2023

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Canonical URL: Malta: 2022 Article IV Consultation-Press Release; and Staff Report

Malta’s economy has recovered strongly following the worst recession in decades due to the coronavirus disease 2019 pandemic.
The strong economic recovery continued into 2022, driven by high net exports and consumption.
The indirect impact of Russia’s war in Ukraine weighs on the outlook.
Gross domestic product growth is set to slow in 2023 as the confluence of global shocks weighs on the economy.
Inflation is expected to gradually decline but remain elevated.
Risks to the outlook are tilted to the downside, mainly because the growth slowdown in Europe could be deeper than expected.
The financial system remains sound, but emerging risks warrant continued vigilance and close monitoring of banks.
Structural reforms are necessary to improve Malta’s long-term growth and address climate challenges.

Short-term projection: GDP growth slows in 2023.
Inflation trajectory: expected to gradually decline but remain elevated.
Downside risk drivers: deeper-than-expected growth slowdown in Europe; indirect effects of Russia’s war in Ukraine; confluence of global shocks.

Overall system: financial system remains sound.
Emerging risks: warrant continued vigilance and close monitoring of banks.
Supervisory recommendation: authorities should closely monitor banks’ risk management to ensure that provisions are continuously updated as economic prospects change.

Macro/financial:
- Maintain close monitoring of bank risk management and provisioning as economic prospects change.
- Remain vigilant to downside risks from European growth slowdown and global shocks.
Structural:
- Implement structural reforms to improve Malta’s long-term growth potential.
Climate and energy:
- Continue concerted efforts involving all stakeholders to implement the 2021 Low Carbon Development Strategy.
- Seek decarbonization potential by exploiting various sources, including investing in renewable sources.

Subject tags: Economic and financial statistics, Energy prices, External sector statistics, Inflation, International organization, Monetary policy, Prices, Public debt, Revenue administration.
Keywords listed: Energy prices, Europe, External sector statistics, Global, Inflation, liability positions vis-à-vis nonresident, money market rate, Policy recommendation, property price index, SDDS preparation.

Source: Malta: 2022 Article IV Consultation-Press Release; and Staff Report (IMF Staff Country Reports 2023, 078).