The European economy is forecast to continue expanding for the seventh year in a row in 2019, with real GDP expected to grow in all EU Member States.
In Malta’s case, it is expected that there will be solid growth ahead, amid rising uncertainties. The significant inflow of foreign workers has helped keep wage growth contained.
The report further states that in 2018, Malta’s economy performed better than expected, with real GDP growth reaching the high rate of 6.6%. Economic growth accelerated in the second half of the year, driven by record-high levels of private consumption growth, which increased by 7.3% compared to the previous year.
GDP slowdown to bottom out in 2019
As global trade and growth are expected to remain weaker this year and next compared to the brisk pace seen in 2017, economic growth in Europe will rely entirely on domestic activity. More Europeans are now in work than ever and employment growth is expected to continue, albeit at a slower pace. This, together with rising wages, muted inflation, favourable financing conditions and supportive fiscal measures in some Member States, is expected to buoy domestic demand. All in all, GDP is forecast to grow by 1.4% in the EU this year and 1.2% in the euro area.
Unemployment continues to fall
Labour market conditions continued to improve despite the slowdown in growth towards the end of 2018. While still too high in certain Member States, unemployment in the EU – at 6.4% in March 2019 – has fallen to the lowest rate recorded since the start of the monthly data series in January 2000. Unemployment in the euro area is currently at the lowest rate since 2008.
Over the next two years, the rate of employment growth is expected to slow as the impact of more moderate growth takes its toll and temporary fiscal measures in some Member States fade. The unemployment rate is expected to continue to fall in the EU in 2019 and is set to reach 6.2% in 2020. The unemployment rate in the euro area is forecast to fall to 7.7% in 2019 and to 7.3% in 2020, lower than it was before the crisis began in 2007.
Inflation to remain subdued
Inflation in the EU is expected to fall to 1.6% this year before rising to 1.7% in 2020. Euro area headline inflation dropped from 1.9% in the last quarter of 2018 to 1.4% in the first quarter of this year due to lower increases of energy prices. With energy price inflation expected to moderate further in the coming quarters and little sign that higher wage growth has been fuelling underlying price pressures, euro area inflation (Harmonised Index of Consumer Prices) is forecast to reach 1.4% in both 2019 and 2020.
For the UK, a purely technical assumption for 2019
In the light of the process of the withdrawal of the UK from the EU, projections for 2019 and 2020 are based on a purely technical assumption of status quo in terms of trading patterns between the EU27 and the UK. This is for forecasting purposes only and has no bearing on the process underway in the context of Article 50.
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