DYNAMIC BUT VIGILANT  ADDRESS BY DR MARIO VELLA GOVERNOR, CENTRAL BANK OF MALTA DELIVERED DURING THE IFS MALTA ANNUAL DINNER  30 NOVEMBER 2018  Dear President and Members of the Committee of the Institute of Financial Services (IFS) Malta, distinguished guests, personally and on behalf of the Board of the Central Bank of Malta, I thank the IFS for this traditional annual opportunity to address this distinguished audience and, through it, all stakeholders. I also join the President in welcoming to Malta the representatives of the Chartered Banker Institute, the London Institute of Banking and Finance, the International Compliance Association and the European Banking and Financial Services Training Association (EBTN). Mr President, it is encouraging to hear of all the initiatives the Institute has undertaken in the area of financial services education. The topical theme of your recent Annual Seminar on ‘Digital  Transformation’ and your pro-activeness in developing a Diploma in Digital Technology for our sector, demonstrate your willingness to embrace change and adapt to the evolving needs of the marketplace. Let me assure you that the Central Bank of Malta will continue to support you. I wish the Institute every success in the future. Last year, I highlighted the fact that the performance of the Maltese economy had exceeded the Bank’s expectations and those of other institutions. Key economic indicators were among the best in Europe, with the European Commission at the time projecting continued, though moderating, strong GDP growth through 2019.

The still very low unemployment rate and the low interest rate environment should continue to shore up private consumption, while investment should benefit from increased public spending on infrastructure as well as new projects in education and health. Certain capital intensive sectors look set for further expansion. The continued strong growth in permits for residential dwellings should also lead to further growth in dwelling investment. It is also evident, however, that maintaining the momentum registered in recent years is becoming an increasingly challenging feat, as a number of internal constraints already identified last year persist. The rapid economic expansion and population growth have put pressure on the country’s physical infrastructure, in particular as regards road transport and health and education facilities. Given the adverse effects of infrastructure gaps on business investment, productivity and social welfare, it should not be surprising that one of the key recommendations which IMF staff issued in January was to boost public investment, to address infrastructure bottlenecks and support medium-term growth  Page | 4  in a budget-neutral manner. This need to boost investment in infrastructure was also acknowledged by the European Commission in its assessment of the Stability Programme and National Reform Programme. In this regard, the Government’s announcement of a seven-year capital investment programme focusing on the road network is an encouraging step forward. However, given that this additional investment coincides with a booming construction sector and more stringent procedures as regards the utilisation of EU funds, the possibility of slippages should not be overlooked.