At the Institute of Financial Services Malta annual dinner, Acting Central Bank Governor Alexander Demarco discussed Malta’s economic forecast, highlighting opportunities and risks as global inflation eases.
Demarco pointed out that the European Central Bank (ECB) started to reduce policy rates in June, however monetary policy remains restrictive, with room for further cuts. Locally, Malta’s inflation has moderated amid strong growth, ut there remain risks from geopolitical conflicts, trade disruption and from the greening agenda. He also requested bolder fiscal consolidation in spite of the deficit decreasin up to 3% of GDP and debt still below 60%.
While Malta’s banks remain stable in terms of profitability and liquidity, Demarco warned against the systemic risk of real estate concentration. He also pointed out the necessity for regulation of non-bank financial institutions and fintech companies as these sectors expand.
He called for a more robust capital market to fund local enterprises, proposing measures to build trust, including debt issuer ratings and sustainable finance mechanisms. Concluding, Demarco warned against complacency, highlighting how productivity and innovation are vital to sustainable growth and increased living standards.
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