Growth expected to remain resilient up to 2028, Central Bank says

According to the Central Bank of Malta’s latest forecasts, the outlook for economic growth is expected to remain robust with GDP growth projected at 3.8% in 2026, 3.6% in 2027 and 3.8% in 2028. Growth is expected to be led by private consumption which is projected to continue to grow at a brisk pace.

Compared to the Bank’s previous projections, the outlook for GDP growth has been revised up by 0.1 p.p. in 2026.

Annual HICP inflation is projected at 2.2% in 2026 down from 2.4% in 2025, reflecting the recent decline in food inflation. Inflation is set to increase slightly in 2027 due to inflationary pressures arising from geopolitical tensions and related supply disruptions in the Middle East. HICP inflation is envisaged to ease to 2.2% by 2028. Compared to the Bank’s previous forecast publication, overall HICP inflation has been revised down by 0.2 percentage points in 2026 and 0.1 percentage points in 2027.

The budget deficit is projected to narrow from 2.2% of GDP in 2026 to 1.6% by 2028. The debt-to-GDP ratio is projected to decline from its peak in 2025, to 46.1% in 2026 and eventually to 44.2% by 2028.

Risks to activity are broadly balanced. Downside risks largely emanate from the uncertainty surrounding the duration and intensity of the conflict in the Middle East and related supply bottlenecks. However, private consumption growth could exceed expectations if employment or wages prove stronger than anticipated.

Inflation risks are tilted to the upside over the projection horizon due to the risk of higher than foreseen services inflation and spillover effects on non-energy inflation related to the conflict in the Middle East. On the fiscal side, risks are assessed to be tilted to the downside (deficit-increasing) mainly reflecting potential current expenditure overruns, particularly on energy support measures.