Mediterranean Observer
The European Commission’s economic forecast could spark hope in Malta’s struggling tourism sector
Malta’s fast vaccination drive, paired with a gradual easing of restrictions in the EU and a high vaccination rate in the UK, is set to put the tourism sector on the path to recovery.
The European Commission’s Spring 2021 Economic Forecast sees Malta experiencing a robust recovery in 2021 and 2022 once tourism bounces back in the economy.
In its report, the Commission points towards Malta’s “faster-than-expected rollout of vaccinations” and the situation in the EU and UK markets, as contributors to tourism recovery in the second half of this year.
Beyond the tourism sector, which was decimated as a result of the pandemic, services exports and household consumption contracted sharply in 2020, contributing to a significant fall in Malta’s GDP.
On the other hand, financial services and gaming sector exports continued to perform robustly.
At a wider macroeconomic level, Malta’s current account deficit is expected to widen further this year, before decreasing in 2022 with recovering exports and imports.
Inflation is expected to rise to 1.2% in 2021, and then further increase to 1.5% in 2022.
The government deficit, which increased to over 10% of GDP in 2020, is projected to increase again to 11.8% of GDP before declining to 5.5% in 2022.
The initial increase in the deficit was due to major spending on pandemic-mitigating measures, and on the revenue side, aggravated by a steep fall in household and tourist consumption, which led to a drop in indirect tax revenue.
Corporate tax revenues also took a plunge, reflecting the worsened profitability of companies.
With regards to government debt, Malta’s debt-to-GDP ratio is set to reach 65.5% in 2022.
