The single currency has provided a valuable anchor during the intensification of the financial turmoil as Malta did not have to carry the risks inherent in a small and vulnerable national currency. The threat posed by the financial crisis was further mitigated by the strength and stability of Malta’s banking system. Our banks benefited from an approach based on traditional intermediation between retail depositors and borrowers. Their funding model, in fact, eschews reliance on wholesale markets. Exposures to asset-backed securities or failed institutions were small, while lending in foreign currency to residents was limited. Throughout the crisis, moreover, capital and liquidity ratios remained well above the regulatory minimum, which helped to retain investor confidence. Malta’s banking system was ranked as the 13th soundest in the world in the World Economic Forum’s Global Competitiveness Report 2009–2010. The health of the domestic banking system is also reflected in its uninterrupted ability to respond to the demand for credit in 2009. The annual rate of increase in bank loans to the private sector, at 8.3%, was only slightly slower than in 2008. 3 This contrasts with the euro area, where private sector credit outstanding has been contracting. It is significant that according to a recent survey, the majority of small and medium-sized enterprises, which form the backbone of the Maltese economy, did not consider access to finance as a main source of concern.
Due to the ongoing weakness in food demand owing to the tourism sector that will persist in 2017 coupled with the measures taken by the Food and Agricultural Products Markets Monitoring and Evaluation Committee (the Food Committee), we expect food inflation to be lower than its historical average in 2017 as well. Accordingly, we revised our assumption for food inflation downwards from 8 percent to 7 percent for end-2017. Our medium-term forecasts are based on an outlook that adjustments to taxes and administered prices will be consistent with the inflation target and automatic pricing mechanisms. For medium-term fiscal policy stance, we use the MTP projections covering the 2017–2019 period. 3. Inflation and the monetary policy outlook Esteemed Guests, Now, I would like to present our inflation and output gap forecasts based on the outlook I have described so far. Given a cautious policy stance that focuses on bringing inflation down, we estimate inflation to approach gradually to the 5-percent target. Inflation is likely to be 7.5 percent in 2016, falling to 6.5 percent in 2017 and stabilizing around 5 percent in 2018. Accordingly, we expect inflation to be, with 70 percent probability, between 7 percent and 8 percent (with a mid-point of 7.5 percent) at end-2016 and between 5 percent and 8 percent (with a mid-point of 6.5 percent) at end-2017 (Chart 17). 8 / 10  BIS central bankers' speeches  The Turkish lira fluctuated following the July Inflation Report, while oil prices increased.