The international economic situation over the last year was dominated by geopolitical tensions, weak economic activity, slow-down in global output, and unfavourable business and consumer confidence. The disinflationary trend continued to persist during the year remaining well below the ECB's target of close to but below two per cent. This called for the activation of unconventional monetary policy measures on the part of the ECB in order to ensure price stability and to stimulate growth over the medium term. Fiscal consolidation within the Euro Area continued in its stride with general government debt expected to diminish over the forecasted horizon. Conversely, general government gross debt continued to accumulate albeit at a slower pace than that registered during previous years. The labour market registered marginal improvements in certain member states nevertheless divergence in this regard continued to widen accompanied by ongoing high levels of unemployment especially amongst youths. The economic and market outlook for 2015 is expected to be significantly influenced by the downward trend in oil prices, the initial effects emanating from the Quantitative Easing programme launched by the ECB, the euro currency depreciation against other currencies, and the mobilisation of investment projects through the EU Investment Plan 2015-2017, amongst other factors.
In Malta, the downward price pressures exerted by the reduction in household utility tariffs and weak price pressures originating from foreign economies continued to push inflation lower. Unemployment remained low in Malta compared to that registered by other member states, and increased female participation continued to be the main driver for employment growth.
As acknowledged in the Concluding Statement of the IMF 2014 Article IV Mission and the European Commission's 2015 Winter Economic Forecast report, Malta remained one of the fastest growing economies in the Euro Area and is expected to register strong economic growth in the forecasted horizon. General government deficit is expected to decline further in conjunction with an anticipated narrowing of the debt-to-GDP ratio.
The financial services sector continued to expand during the year within a robust regulatory regime. Developments in the EU financial services landscape continued to shape the dynamics of the sector in terms of tightened regulatory framework, stronger supervision, additional consumer protection and further supervisory reforms.
Further insights on the economic performance and outlook for Malta and the Euro Area may be found in the seventh issue of the Economic and Market Overview published on the MFSA website. The report also contains an overview of key regulatory and supervisory developments in 2014. These include the banking sector reform, the banking comprehensive assessment and the insurance stress test. An overview of the key elements underlining the performance of the EU financial system is presented in the report. The full version of the Economic and Market Overview may be accessed from the MFSA website www.mfsa.com.mt under Publications.
The net asset value of Malta domiciled funds touched €9.7 billion at the end of 2014, up by over €0.3 billion or 3.3 percent from the previous year. This represents almost the same level reached at the end of 2012. Diversified funds remained the most popular with investors, experiencing a share of 46 percent of the total net assets in 2014. Equity funds and bond funds followed at 23.2 percent and 15.9 percent respectively.
MFSA Newsletter - February 2015
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