Malta’s economic momentum shows resilience as confidence cools slightly

Malta’s economy continued to exhibit solid performance in early 2026, with business activity and sentiment indicators pointing to growth that outpaces historical norms, even as some domestic and external headwinds temper expectations.

The Central Bank of Malta’s Business Conditions Index suggests that annual growth in business activity edged up modestly in February from January’s already elevated level and remained above its long‑run average, reinforcing signs of resilience in the local economy. Domestic sentiment, however, was less unequivocal. The European Commission’s Economic Sentiment Indicator for Malta dipped from its historic peak reached in January, albeit staying well above typical readings, indicating that optimism among firms and consumers, while still strong, may be plateauing. At the same time, the Employment Expectations Indicator fell and now sits below its long‑term average, hinting that firms are growing less confident about near‑term hiring. The Economic Uncertainty Indicator turned positive in February, signalling heightened uncertainty around financial and business decision‑making.

Other short‑term economic data were mixed. Industrial production in January grew on a year‑on‑year basis after contracting in the previous month, while retail trade’s annual growth was unchanged and services output weakened over the year to December. The unemployment rate ticked up to 3.4 percent in January, a 0.2 percentage point increase on December’s figure. Residential construction permits declined year‑on‑year in January, though both promise‑of‑sale agreements and final sale deeds for homes rose in February.

Inflation trends remained steady in February. The annual Harmonised Index of Consumer Prices (HICP) inflation rate held at 2.3 percent, with core inflation excluding food and energy at 2.2 percent. On the Retail Price Index (RPI) measure, inflation also remained unchanged at 2.5 percent. Notably, overall HICP inflation in Malta was above the euro‑area average, while core inflation was below it.

On public finances, the Consolidated Fund recorded a narrower deficit in January compared with a year earlier, as increases in government revenue outpaced expenditure growth. Meanwhile, credit and deposit growth among Maltese residents moderated in January relative to December.