Activity in most sectors close to pre-pandemic levels, says Central Bank in economic update

The Central Bank of Malta’s business conditions index for June shows that annual growth in business activity has normalised from “record highs” registered in the first half of 2021, “as activity in most sectors is close to or is exceeding pre-pandemic levels”.

It is understood that the record highs recorded in the CBM’s index for the first half of 2021 stem from a boom in business activity as life slowly began its return to normality from pandemic-related restrictions.

Confidence

The European Commission’s confidence survey, also covering June, shows that economic sentiment in Malta edged down when compared to May, but still remained above its long-term average, estimated since November 2002.

When comparing June to a month earlier, the retail sector was a strong driver for the deterioration in sentiment. When considering ongoing rapid inflation, which tends to lead to lower spending among consumers, it comes as no surprise that confidence has been rattled among Malta’s retailers.

Still, the deterioration in confidence has been partly offset by improved sentiment in industry and the services sector, the latter of which took a particularly strong beating during the pandemic.

Production

In May, industrial production contracted in annual terms, though at a smaller rate compared with April. Meanwhile, the volume of retail trade rose at a slower pace than in the previous month.

Unemployment

The unemployment rate was unchanged from a month earlier and below last year's rate.

Property

In June, both the number of promise-of-sale agreements and final deeds of sale fell on a year-on-year basis, while both commercial and residential permits rose in May relative to their year-ago levels.

Inflation

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 6.1 per cent in June, up from 5.8 per cent in the previous month.

 Inflation based on the Retail Price Index (RPI) also rose, reaching 6.2 per cent in June from 6.0 per cent a month earlier. For context, RPI in June 2021 stood at 1.47 per cent.

Finances

In May 2022, the Consolidated Fund recorded a surplus compared with a deficit a year earlier as Government revenue rose at a much faster pace than government expenditure.

Annual growth in residents' deposits remained strong in May, rising by 11.1 per cent. Meanwhile annual growth in credit to Maltese residents moderated to 6.8 per cent. By the end of the month, 628 facilities were approved and still outstanding in terms of the Malta Development Bank (MDB) COVID-19 Guarantee Scheme, corresponding to total sanctioned amounts of €486.6 million. In May, three loan facilities were approved under a new MDB Subsidised Loans Scheme aimed at importers and wholesalers of wheat and animal feeds, covering total sanctioned lending of €15.6 million.