The new Governor of the Central Bank of Malta, Alexander Demarco signed his first annual report, after his predecessor, Governor Edward Scicluna was forced to resign from his post by the government following his arraignment in Court on the Vitals scandal. Edward Scicluna resisted his sacking and also forced the government to keep him on the payroll, retaining his title only in name.
In his foreword to the report, the Central Bank Governor said that the Maltese economy showed strong resilience despite a challenging international environment but warned that Malta’s economic growth rate is projected to wind down. Despite lowering inflation both in Malta and Europe across non-energy components, the economy faces risks due to increasing restrictions in the multilateral trading system. The central banker warned that:
“As the global trading order is shifting towards more protectionism, maintaining a robust pace of growth will hinge on the ability to enter markets that are not targeted by tariffs while also overcoming inefficiencies that render goods and services uncompetitive on export markets.”
The Central Bank President also wrote that the CBM is well prepared for the roll-out of the digital Euro and is working closely with the ECB on this project.
According to the Central Bank of Malta, total bank deposits in Malta increased to €57.43 billion by the end of 2024, an increase of €3.54 billion compared with 2023, or a 6.6% increase. However, this increase mostly came owing to the increase of assets by international banks in Malta which increased by up to €3 billion and by 30.7%. On the other hand, during 2024, core domestic banks’ assets increased by €1.36 billion or 4.6%.
Total deposits held by residents increased by 7.0% during 2024, reaching €25.42 billion the end of 2024, reversing the downward trend in 2023. The share of core domestic banks’ assets in proportion to GDP stood at 136.8% at the end of 2024. This was lower than the share of 143.0% recorded in 2023, as GDP growth outpaced core banks’ assets. Meanwhile, assets pertaining to non-core domestic banks decreased by €232.6 million, or 6.5%.
Mortgage lending grew by 9.4% during 2024, compared with a 7.9% increase in 2023. Consumer lending increased slightly and other household credit decreased. Loans to the construction sector and real-estate also increased. Corporate issuance of bonds and stocks also increased.
The CBM projects the economic growth to slow in the coming years after a significant 5.7% GDP growth rate in 2024. The ECB is projecting the Maltese economy to grow by 4.8% in 2025, 3.8% in 2026 and by 3.1% in 2027. The ECB projects that the labour market will remain strong but growth in both imports and exports will slow down.
Around 395 loans of the emergency Covid liquidity measures at the Malta Development Bank are still outstanding with private parties but most of these loans have been paid off, with the emergency loans totaling at €320.7 million and only €126.7 million remain outstanding. These will be paid in the next three years.
In 20243 the government issued less the Treasury bills than 2023, issued €1.67 billion worth of bills in 2024, compared to €2,20 billion issued in 2023. The ECB also noted that the MSE index closed 4.9% down in 2024 to 2023.
The Central Bank is arguing that most of the economic growth in 2024 was owing to the overutilisation of its labour force, partly also pushed by the inflow of migrant workers. The CBM is arguing that the overutilisation of labour reached a peak in 2024 causing a deceleration in the growth rate. Economic sentiment in the Maltese economy also went down in 2024 with sentiment in the retail and industrial sectors going negative. Consumer confidence moderated but remained negative.
On the other hand, on the government’s debt, the CBM argues that its sustainability risks have decreased from 2023 and are now stabilising. The CBM projects that risks to Malta’s public debt sustainability will go down in the coming years.
The annual report can be downloaded here.
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