The need for long-term investment Let’s now shift to a more critical gear. At present, financial institutions deposit with the Central Bank close to four times the average of the previous ten years. In essence, all the growth this year in deposits from Maltese residents has ended up being deposited with us  Page 6 of 10  at the Central Bank. Loans to the private sector have essentially remained flat. Taking a longer term perspective, bank lending to nonfinancial corporations has fallen from 62% of GDP in 2009 to 31% in the first half of this year. From a situation where credit to the nonfinancial sector amounted to more than half of all bank loans, the share has fallen to slightly more than a third. Now, the usual explanation is that banks welcome any feasible projects that comes forward, and that the decline is therefore demand and not supply driven. Moreover, stricter regulation on bank capital and liquidity has made life tougher for bankers, and this, it is argued, has warrants a higher level of caution regarding which projects are financed. Permit me, however, to submit some other facts for your consideration. The recent IMF mission concluded that the cost of bank borrowing for corporates in Malta is among the highest in the euro area, and the spread has been widening in recent years. In their forthcoming report in January 2018 they will furthermore show that credit supply constraints impact SMEs disproportionately.
But with growth slowing, I anticipate the unemployment rate to increase from its current level of 3-1/2 percent to around 4-1/2 percent over the next year. Turning to inflation, I expect cooling global demand and supply improvements to result in declining inflation for goods. These factors should contribute to inflation slowing further from its current rate to around 3 percent this year. While services inflation is still a sticking point, I expect overall inflation to come back down to 2 percent in the next few years as further tightening of monetary policy realigns the balance between demand and supply. Conclusion I'll close by saying that the monetary policy gear is turning. But it will take time for supply and demand to come back into proper alignment and balance, so we must keep moving. While the route ahead is still uncertain, I am fully confident we will return to a sustained period of price stability. 1 John C. Williams, Peeling the Inflation Onion , remarks at the Economic Club of New  York, delivered via videoconference (November 28, 2022); John C. Williams, A Bedrock Commitment to Price Stability , remarks at the 2022 U.S. Hispanic Chamber of Commerce National Conference, Phoenix, Arizona (October 3, 2022). 2 John C. Williams, A Steady Anchor in a Stormy Sea , remarks at SNB-FRB-BIS High-  Level Conference on Global Risk, Uncertainty, and Volatility, Zurich, Switzerland (November 9, 2022).