Business conditions remain positive in Q2, but sectoral disparities persist – Central Bank of Malta

Business sentiment in Malta remained broadly positive during the second quarter of 2025, although the outlook varied significantly across sectors, according to the Central Bank of Malta’s (CBM) latest business dialogue with non-financial corporations.

The economy-wide net share of firms reporting an expansion in activity stood at 22 per cent, a modest improvement over the previous quarter but still below the levels seen over the past three years.

Service-oriented businesses recorded the strongest performance, followed by positive sentiment in the manufacturing, construction, and real estate sectors. However, the wholesale and retail sector reported overall negative conditions, reflecting ongoing challenges.

Looking ahead, companies expressed increased optimism, with a net 33 per cent anticipating an improvement in short-term business activity. While this marks a slight dip from 35 per cent in the previous survey round, service providers and manufacturers maintain a favourable outlook. The construction and real estate sector remains cautiously optimistic, while wholesale and retail businesses reported negative expectations, citing intensified competition, price sensitivity, and broader economic uncertainty.

Cost pressures, although still high, have started to ease. The net share of firms reporting higher input costs fell to 63 per cent, down from 81 per cent in the first quarter. Similarly, the proportion of businesses raising their selling prices declined to 42 per cent, compared to 48 per cent previously.

Investment intentions, however, showed a notable slowdown. The net share of firms planning to increase investment dropped to 13 per cent, from 24 per cent in the first quarter. According to the CBM, investment continues to be motivated by capital expenditure, operational efficiency, business expansion, and diversification.

Employment plans remained stable, with a net 45 per cent of companies expecting to recruit in the short term – nearly unchanged from the previous quarter. Yet, many businesses continue to face persistent difficulties in attracting and retaining skilled workers.

The CBM’s publication also includes a special focus on corporate perspectives regarding tariffs. Uncertainty surrounding their implementation is leading many firms to adopt a cautious, “wait and see” approach.

The Central Bank of Malta conducts regular business dialogue exercises to monitor private sector sentiment and inform economic policy.