Domestic demand was the main driver behind GDP growth during the last three months of 2021, the CBM has found.
In its quarterly review, it said that the contribution of net exports, while positive, was marginal. Sector data show that the expansion was primarily driven by the services sector, especially the sector comprising wholesale and retail trade, transportation, accommodation and related activities. Nevertheless, this sector has not fully recovered from the impact of the pandemic, with its GVA standing almost 6.0% lower than its level in the fourth quarter of 2019.
On the other hand, the Bank noted a strong recovery in construction, while supply bottlenecks constrained activity in the manufacturing sector, whose contribution to GDP growth turned slightly negative in the quarter under review. During the fourth quarter of 2021, the developments in the labour market remained positive and indeed, employment remained above pre-pandemic levels.
At the same time, activity rates rose further. The unemployment rate continued to decline and remained well below that in the euro area. Employment increased on an annual basis as it continued to benefit from the ongoing normalisation of economic activity in the context of a tight labour market, although Government measures – such as the Wage Supplement Scheme – also provided some support to employment.
The Bank said that the Business Conditions Index declined towards the end of 2021, but continued to signal strong growth
In the fourth quarter of 2021, Bank’s BCI stood above its average historical level, pushed upwards by several sub-components particularly in tourist arrivals, economic sentiment and GDP, as well as by significant falls in unemployment.
Real GDP rose by an annual 10.0% in the fourth quarter of the year, following an increase of 12.7% in the preceding quarter. This strong increase in growth on an annual basis partly reflects the relatively low activity levels recorded in the fourth quarter of 2020. The GDP level closed the quarter under review 1.2% above its level in the fourth quarter of 2019, i.e. before COVID-19 began to affect economic activity.