April saw business activity normalise, but economic sentiment declined

The Central Bank of Malta’s (CBM) Business Conditions Index for April indicates that annual growth in business activity remained above its long-term average, though normalising at lower levels from previous months.

The European Commission’s Confidence Survey also showed that economic sentiment in Malta declined in April when compared with a month earlier and stood below its year-ago level.

However, it was still above its long-term average. When compared with March, confidence weakened in the services sector, and to a lesser extent among retailers, and turned negative in industry. By contrast sentiment improved among consumers and in construction.

Additional survey information showed that compared to March, a smaller share of respondents in the services and retail sectors, as well as consumers, expected prices to increase in the coming months. Prices were expected to increase in construction in contrast to expectations of lower prices a month earlier. Price expectations in industry reached a record high, the CBM noted.

Uncertainty

The European Commission’s Uncertainty Indicator for Malta fell when compared with March, signalling lower uncertainty. It was found that his decrease in uncertainty was largely driven by developments in industry, and to a smaller degree, in the construction and retail sectors.

Activity

In March, industrial production contracted again in annual terms, though at a slower annual rate when compared with February. Meanwhile, the volume of retail trade rose at a faster pace than previously. While the CBM did not speculate as to why this occurred, a return of weddings, family celebrations, events and mass events will likely have contributed to this. Additionally, the return of relatively restriction-free travel has bolstered the number of tourists on the island.

Unemployment

The unemployment rate fell marginally from the rate registered in March, and remained well below the rate registered a year earlier.

Property

In April, the number of final deeds of sale and promise-of-sale agreements for residential property fell on a year-on-year basis. Both commercial and residential permits rose markedly in March relative to their year-ago levels.

Inflation

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 5.4 per cent in April, up from 4.5 per cent in the previous month. Inflation based on the Retail Price Index (RPI) also rose, reaching 5.7 per cent in April, from 4.4 per cent a month earlier.

Government finances

In March 2022, the Consolidated Fund deficit widened compared with a year earlier as expenditure increased at a faster pace than revenue.

Deposits and loans

Annual growth in residents’ deposits and credit remained strong in March, at 10.1 per cent and 7.7 per cent, respectively. By the end of the month, 640 facilities were approved and still outstanding in terms of the Malta Development Bank COVID-19 Guarantee Scheme, corresponding to total sanctioned amounts of €489.3 million.