The COVID-19 pandemic is having an acute impact on critical sectors of Malta’s economy including tourism and external trade, leading to a temporary and limited increase in the unemployment rate.
In its Autumn Forecast, the European Commission is forecasting a modest recovery is forecast in 2021 and 2022 for the Maltese economy, but expresses concern at the considerable uncertainty surrounds the evolution of the pandemic and the impact of the change to less beneficial trading relations between the UK and the EU.
According to the EU executive, Brexit is expected to have a considerable negative impact on the trade balance between the UK and Malta. The new trade relations are expected to have the strongest impact on growth in 2021 and to a lesser extent also in 2022.
A recovery driven by domestic demand is expected to accelerate from slow GDP growth of 3.0% in 2021 to some 6¼% in 2022, reapproaching its 2019 level.
The reported noted how prior to the outbreak of the pandemic, Malta’s labour market was tight and the unemployment rate reached a historical low of 3.6% in 2019. National safety measures to contain the virus affected employment only to a limited extent, such that the unemployment rate is expected to reach 5.1% in 2020, decreasing to 4.1% in 2022, in line with an accelerating economic growth.
After a major crisis-induced plunge in 2020, the general government balance is set to gradually improve, while public debt is expected to peak at 60% of GDP in 2021.