prices

During a Council meeting of EU energy ministers in Brussels, Minister for Environment, Energy and Enterprise Miriam Dalli reiterated Malta's position on the need to decouple gas prices from electricity prices

As things stand today, electricity prices are set by the market hourly closing prices, which are usually determined by the electricity generated by gas power plants and hence by gas prices

On the new electricity market design proposal, Minister Dalli highlighted the need to reform the EU electricity market States like Malta are exposed to high electricity prices due to how the EU electricity market operates, even though government measures protect the Maltese consumer from fluctuating prices

She emphasised the importance of delivering a revised market design that ensures price stability and guarantees the security of supply in the long run – the benefits of which should effectively be shared amongst all EU consumers, including consumers in member states dependent on cross-border markets, like Malta

Discussions on the Electricity Market Design will continue in the coming weeks and months

Meanwhile, Energy Ministers agreed to extend for another year the regulation on coordinated gas demand reduction for gas, which aims to reduce EU dependency on Russian gas and prepare for the forthcoming winter season

Malta had successfully negotiated a derogation from a European Commission proposal that imposed a 15% reduction in demand for natural gas which was neces-

Minister Miriam Dalli in Brussels meeting sary as Malta is heavily dependent on electricity Any mandatory reduction would have hurt families and businesses.

Through this extension regulation, Malta has negotiated to retain its derogation ogy (ICT) and professional services were key sectors driving growth while construction contracted quite sharply Recovery in the tourism sector continued narrowing the gap in tourist arrivals relative to 2019 to around 17% in 2022

Fitch forecasts growth to slow to 3.5% in 2023 due to the projected economic slowdown in Malta's main trading partners, as evidenced by moderation in economic indicators Growth will be close to potential in 2024, reaching 3.7%.

The lifting of international travel restrictions has helped support the return of foreign workers, further uplifting domestic consumption and potential growth while somewhat easing the structural labour supply shortage It recognises that Malta's unemployment reached a new record low of 2 9% in 2022, well below the pre-pandemic rate of 3.6% in 2019.

Import Prices Drive Inflation: HICP inflation averaged 6.1% in 2022, below the eurozone average of 8 4% as the authorities froze energy prices Headline inflation reached 7.0% in February, driven by continued high core inflation of 6 3% As a small and open island economy, a large portion of core inflation is imported, and Malta has been disproportionally affected by higher food and construction prices.

The government remains committed to limiting the increase in electricity and fuel prices, implying that the agency expects a zero contribution from energy prices to inflation throughout the projection horizon Inflation will moderate to 4 9% in 2023 as food prices normalise and international price pressures abate, but wage inflation picks up with a lag

Fitch said that Malta is a large net external creditor compared with the rest of the world but hosts many special-purpose entities and multinationals in financial and insurance activities, distorting international accounts