The latest Quarterly Review of the Central Bank of Malta (CBM) paints a picture of continued economic expansion in Malta, although the external environment remains increasingly uncertain. For businesses, the latest developments point to a combination of strong domestic activity, a tight labour market and emerging cost and competitiveness pressures.

Economic growth remains robust

Malta’s real GDP increased by 3.9% year-on-year in the first quarter of 2026, following growth of 6.5% in the previous quarter. Growth was primarily driven by domestic demand, which increased by 4.5%. Government consumption recorded a particularly strong growth of 8.5%, while private consumption increased by 3.7%. Investment also strengthened, with gross fixed capital formation rising by 3.6%.

Business sentiment remains positive

The economic environment remains broadly favourable for businesses. Malta’s Economic Sentiment Indicator (ESI) increased to 116.2 in Q1 2026, significantly above its long-term average of around 100 and the euro area average of 97.8. Confidence improved across most sectors, with particularly strong developments in industry and services. The Central Bank's Business Conditions Index also remained above its historical average, suggesting that economic activity continued to exceed its long-run pace.

Labour shortages remain a key challenge

Malta's labour market remains tight. Employment and activity rates continued to rise, while the unemployment rate stood at 3.5%, well below the euro area level. Both job vacancies and the vacancy rate increased compared with a year earlier. For businesses, this continued labour tightness can translate into challenges in recruitment, employee retention and wage costs. Investment in productivity, technology, skills and organisational efficiency is therefore likely to remain increasingly important.

Inflation and external risks remain relevant

Annual HICP inflation stood at 2.3% in March 2026, down from 2.5% in December 2025. However, the wider international environment has become more challenging. Higher energy prices and geopolitical uncertainty are weighing on the outlook for the European economy, while higher commodity prices and changing financing conditions could continue to affect businesses.

Property market

According to NSO data, 3,383 final deeds of sale for residential properties were registered in the first quarter of 2026, representing a 5.0% decrease compared with the previous quarter, but a 7.6% increase compared with the same quarter of 2025. Around 90% of transactions involved purchases by individuals, while the year-on-year increase was mainly driven by higher transaction volumes in the Northern Harbour and Southern Harbour districts. In value terms, residential property transactions increased by 22.5% year-on-year, largely reflecting a significant increase in the value of properties purchased by non-individual buyers.

Meanwhile, 3,862 promise-of-sale agreements were registered, 2.3% fewer than in the previous quarter but 11.7% more than in the first quarter of 2025, with the largest increases recorded in the Southern Harbour and Northern Harbour districts. On the rental market, advertised rents collected by the Central Bank from internet sources increased at an annual rate of between 4.9% and 5.3% in Q1 2026, indicating a faster pace of growth compared with recent quarters. Nevertheless, rental price growth remains below the double-digit annual rates recorded in 2023 and the first half of 2024, with rental prices continuing to exhibit a volatile quarterly pattern.

Tourism

Tourism activity in Malta remained robust during the first quarter of 2026, with tourist arrivals increasing by 16.3% year-on-year to 806,563, compared with 693,492 in the corresponding period of 2025. The increase was particularly supported by visitors from Poland and the United Kingdom, while holiday-related travel accounted for the majority of the additional arrivals. Tourist expenditure also continued to expand, rising by 15.0% to €584.7 million, albeit at a slower pace than the 24.6% growth recorded a year earlier. Despite higher overall expenditure, expenditure per tourist declined from €733.2 to €725.0, reflecting a shorter average stay, which fell from 5.7 to 5.5 nights, although expenditure per night increased by 2.7%.

Total nights spent in Malta increased by almost 12% to 4.5 million, primarily driven by greater use of rented accommodation. Accommodation performance remained broadly positive, with the overall occupancy rate increasing slightly to 52.9%, while five-star establishments recorded the strongest improvement and four-star establishments achieved the highest occupancy rate at 58.4%. Increased air connectivity also supported tourism activity, with average monthly seat capacity rising to 850,181, up from 745,075 a year earlier.

What does this mean for businesses?

The latest indicators suggest that Malta's economy continues to provide a relatively strong operating environment. However, strong demand should not obscure the structural challenges businesses are facing, including rising operational costs

For businesses, this is an opportune time to focus on strategic planning, productivity, investment and cost management. Assessing workforce requirements, identifying opportunities for digitalisation and automation, reviewing business models and carefully evaluating investment decisions can help businesses remain competitive in an environment where growth is accompanied by rising complexity.

At PKF Malta, we support businesses in navigating these developments through economic and market analysis, feasibility studies, business planning, financial analysis, funding support and strategic advisory services.