February 27, 2019
The discussion included an assessment of the financial system based on the work of FSAP.
", "publishDate": "2019-02-27", "sections": [ { "heading": "Overview", "content": "- Date of release: February 27, 2019.\n- The Executive Board concluded the Article IV consultation with Malta on February 22, 2019.\n- The discussion included an assessment of the financial system based on the work of the Financial Sector Assessment Program (FSAP)." }, { "heading": "Growth, labor market, and inflation", "content": "- Malta has been one of the fastest growing countries in Europe post-crisis, driven by rapid rebalancing toward export-oriented services, notably remote gaming.\n- Authorities have started to explore development areas around blockchain technology.\n- GDP is estimated to have expanded by 6.4 percent in 2018.\n- Growth remains rapid and increasingly driven by domestic demand, but a cyclical peak may have been reached.\n- Over the medium term, growth is projected to gradually moderate to slightly above 3 percent as wage and inflation stabilize and the current account surplus remains large, driven by strong export of services.\n- Despite tight labor market conditions, generalized wage and price pressures are yet to materialize.\n- Strong inflows of foreign workers have helped keep wage pressure contained, while putting rising pressure on infrastructure and housing prices." }, { "heading": "Fiscal position and current account", "content": "- The fiscal balance is estimated to have registered a surplus in 2018, owing to favorable economic conditions and buoyant proceeds from the Individual Investor Program.\n- Directors encouraged the authorities to maintain a prudent fiscal policy and called for further efforts to strengthen the structural fiscal position excluding revenues from the Individual Investor Program.\n- Key fiscal priorities recommended:\n - Contain long-term fiscal risks by addressing age-related spending pressures.\n - Further restructure vulnerable state-owned enterprises (SOEs).\n - Shift the balance of expenditure towards growth-enhancing public investment.\n - Strengthen public investment management and risk analysis.\n - Explore avenues for broadening the tax base.\n- The current account balance has remained on a positive trend, driven by a continued surplus in services." }, { "heading": "Financial sector, FSAP findings, and recommended actions", "content": "- The banking system is described as well-capitalized, liquid, profitable and resilient, but faces some challenges.\n- FSAP stressed shortcomings in banking supervision, including implementation gaps in the anti-money laundering and countering the financing of terrorism (AML/CFT) framework.\n- FSAP identified weaknesses in the bank liquidation and insolvency framework.\n- Executive Directors and staff recommendations:\n - Pursue ongoing reforms to mitigate money laundering and terrorist financing (ML/TF) risks and swiftly close gaps in supervisory and enforcement capacities.\n - Continue implementing the recently-enacted 50-point action plan and emphasize the importance of effective enforcement.\n - Supervise virtual financial asset service providers in line with the Financial Action Task Force standards.\n - Guarantee the long-term financial and operational independence of the supervisor.\n - Strengthen the crisis management framework, including by adopting an administrative bank insolvency regime.\n - Strengthen oversight of the nonbank financial sector and close remaining data gaps in light of rapid diversification of corporate financing.\n - Introduce borrower-based macroprudential instruments to mitigate the build-up of vulnerabilities in the real estate sector.\n - Support further measures to improve housing affordability for low-income households." }, { "heading": "Structural reforms and labor market policies", "content": "- Directors emphasized structural reforms to foster sustained and inclusive growth.\n- Recommended measures:\n - Bridge infrastructure gaps.\n - Upskill and reskill the labor force.\n - Further encourage female and elderly participation in the labor market.\n - Stimulate innovation through SMEs’ enhanced access to finance.\n - Improve the efficiency of the judicial system." }, { "heading": "Selected economic indicators, 2015–2020 (year-on-year percent change, unless otherwise indicated)", "content": "- Per Capita GDP (2017): €24.2 thousand\n- Quota: 168.3 million SDR, .04% of total\n\nReal economy (constant prices) — Percent change year on year\n- Real GDP:\n - 2015: 10.6\n - 2016: 5.7\n - 2017: 6.6\n - 2018: 6.4\n - 2019 (projection): 5.2\n - 2020 (projection): 4.4\n- Domestic demand:\n - 2015: 14.5\n - 2016: 1.1\n - 2017: -1.5\n - 2018: 6.0\n - 2019 (projection): 5.3\n - 2020 (projection): [value not provided in table]\n- CPI (harmonized, average):\n - 2015: 1.2\n - 2016: 0.9\n - 2017: 1.3\n - 2018: 1.7\n - 2019 (projection): 2.0\n - 2020 (projection): 2.1\n- Unemployment rate (percent):\n - 2015: 5.4\n - 2016: 4.7\n - 2017: 4.0\n - 2018: 4.1\n - 2019 (projection): 4.3\n\nPublic finance (General government, percent of GDP)\n- Overall balance:\n - 2015: -1.1\n - 2016: 3.5\n - 2017: 0.6\n - 2018: [value not provided in table]\n- Primary balance:\n - 2015: 3.0\n - 2016: 2.5\n - 2017: 1.9\n - 2018: [value not provided in table]\n- Structural balance 1/:\n - 2015: -2.1\n - 2016: 3.4\n - 2017: 0.4\n - 2018: 0.3\n- Gross debt:\n - 2015: 57.9\n - 2016: 55.4\n - 2017: 50.2\n - 2018: 45.4\n - 2019 (projection): 42.4\n - 2020 (projection): 39.0\n\nFinancial sector\n- Credit to the private sector (percent GDP):\n - 2015: 87.3\n - 2016: 84.4\n - 2017: 79.4\n - 2018: [value not provided in table]\n- Credit to nonfinancial private sector 2/: […] (loans to nonfinancial corporate sector and households/individuals)\n\nInterest rates (year average)\n- Interest rate for mortgage purposes: 3.1 (year not specified)\n- Ten-year government bond yield: 1.5 (year not specified)\n\nBalance of payments (Percent of GDP)\n- Current account balance:\n - 2015: 2.4\n - 2016: 10.4\n - 2017: 10.1\n - 2018: 9.3\n - 2019 (projection): 8.8\n- Trade balance (goods and services):\n - 2015: 9.0\n - 2016: 13.2\n - 2017: 20.9\n - 2018: 21.4\n\nExchange rate\n- Exchange rate regime: Joined EMU on January 1, 2008.\n- Nominal effective rate (2010=100):\n - 2015: 97.7\n - 2016: 97.9\n - 2017: 99.6\n- Real effective rate, CPI-based (2010=100):\n - 2015: 98.4\n - 2016: 99.5\n\nNotes\n- Sources: National Statistical Office of Malta; Central Bank of Malta; European Central Bank; Eurostat; European Commission; and IMF staff estimates.\n- 1/ As a percentage of Nominal Potential GDP.\n- 2/ Loans to nonfinancial corporate sector and households/individuals.\n\nIMF Executive Board Concludes 2019 Article IV Consultation with Malta — Press Release No. 19/61 (February 27, 2019).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Malta and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/02/27/pr1961-malta-imf-executive-board-concludes-2019-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2019/02/27/pr1961-malta-imf-executive-board-concludes-2019-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2019/02/27/pr1961-malta-imf-executive-board-concludes-2019-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2019/02/27/pr1961-malta-imf-executive-board-concludes-2019-article-iv-consultation/bundle-manifest.json)", "Published: February 27, 2019", "Date of release: February 27, 2019.", "The Executive Board concluded the Article IV consultation with Malta on February 22, 2019.", "The discussion included an assessment of the financial system based on the work of the Financial Sector Assessment Program (FSAP).", "Malta has been one of the fastest growing countries in Europe post-crisis, driven by rapid rebalancing toward export-oriented services, notably remote gaming.", "Authorities have started to explore development areas around blockchain technology.", "GDP is estimated to have expanded by 6.4 percent in 2018.", "Growth remains rapid and increasingly driven by domestic demand, but a cyclical peak may have been reached.", "Over the medium term, growth is projected to gradually moderate to slightly above 3 percent as wage and inflation stabilize and the current account surplus remains large, driven by strong export of services.", "Despite tight labor market conditions, generalized wage and price pressures are yet to materialize.", "Strong inflows of foreign workers have helped keep wage pressure contained, while putting rising pressure on infrastructure and housing prices.", "The fiscal balance is estimated to have registered a surplus in 2018, owing to favorable economic conditions and buoyant proceeds from the Individual Investor Program.", "Directors encouraged the authorities to maintain a prudent fiscal policy and called for further efforts to strengthen the structural fiscal position excluding revenues from the Individual Investor Program.", "Key fiscal priorities recommended:", "The current account balance has remained on a positive trend, driven by a continued surplus in services.", "The banking system is described as well-capitalized, liquid, profitable and resilient, but faces some challenges.", "FSAP stressed shortcomings in banking supervision, including implementation gaps in the anti-money laundering and countering the financing of terrorism (AML/CFT) framework.", "FSAP identified weaknesses in the bank liquidation and insolvency framework.", "Executive Directors and staff recommendations:", "Directors emphasized structural reforms to foster sustained and inclusive growth.", "Recommended measures:", "Per Capita GDP (2017): €24.2 thousand", "Quota: 168.3 million SDR, .04% of total", "Real GDP:", "Domestic demand:", "CPI (harmonized, average):", "Unemployment rate (percent):", "Overall balance:", "Primary balance:", "Structural balance 1/:", "Gross debt:", "Credit to the private sector (percent GDP):", "Credit to nonfinancial private sector 2/: […] (loans to nonfinancial corporate sector and households/individuals)", "Interest rate for mortgage purposes: 3.1 (year not specified)", "Ten-year government bond yield: 1.5 (year not specified)", "Current account balance:", "Trade balance (goods and services):", "Exchange rate regime: Joined EMU on January 1, 2008.", "Nominal effective rate (2010=100):", "Real effective rate, CPI-based (2010=100):", "Sources: National Statistical Office of Malta; Central Bank of Malta; European Central Bank; Eurostat; European Commission; and IMF staff estimates.", "1/ As a percentage of Nominal Potential GDP.", "2/ Loans to nonfinancial corporate sector and households/individuals.", 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