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Malta: 2017 Article IV Consultation-Press Release; Staff Report

2018; International Monetary Fund; Volume: 18; Issue: 19 Linguagem: Inglês

10.5089/9781484339466.002

2227-8907

International Monetary Fund,

State Capitalism and Financial Governance

concluded the 2017 Article IV consultation 1 with Malta, and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis. 2 Malta's economic growth remains one of the strongest in Europe, owing to favorable economic conditions and sound policies, which advanced structural reforms and supported the strengthening of private and public balance sheets.Output is estimated to have expanded by 6.8 percent in 2017, accompanied by dynamic job creation, which brought unemployment to a record-low.Strong inflows of foreign workers and rising labor force participation kept wage pressures contained in most sectors, thus contributing to low inflation despite a positive output gap.At the same time, the rapid economic expansion and the growing population have put pressure on physical infrastructure and resulted in a continued housing market appreciation.The fiscal balance is estimated to have registered a surplus for the second consecutive year in 2017, thanks to buoyant revenues-including from Individual Investor Program proceedsand contained capital expenditure growth.The 2017 current account is estimated to have remained in surplus, driven largely by a sizable balance of services.Domestic banks remain profitable and well-capitalized.High legacy corporate non-performing loans represent a persistent challenge for the banking sector, despite the continued improvement in banks' asset quality.As bank lending remains focused on mortgages, the concentration of property-related loans continued to grow while the non-financial corporate sector has increased its reliance on nonbank financing, particularly on intercompany lending.The outlook is favorable, with growth decelerating gradually and converging to about 3 percent over the medium term.Growth is expected to be driven largely by domestic demand, backed by rising incomes and historically-low unemployment while buoyant services exports 1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year.A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies.On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.