Economic sentiment in Malta reaches highest level in six months

Economic sentiment in Malta for March reached the highest level recorded in the last six months, although it remains negative in all sectors.

The European Commissions’ Economic Sentiment Indicator, which reached 95.0 in March, revealed that the increase was primarily driven by a rise in confidence in industry, with retailers also reported a more limited increase.

By contrast, it deteriorated in the services sector and among consumers, while it remained largely unchanged in the construction sector.

The figures emerge from the Central Bank of Malta’s Economic Update, published on Wednesday, which also includes the Business Conditions Index for March.

This index remained marginally below its level in the same month of 2020 and continued to signal low levels of activity, reflecting the weak economic environment triggered by COVID-19.

The Bank’s estimate of the COVID-19 Government Response Index – which is a composite indicator that summarises various containment, economic and health-related measures introduced in response to the pandemic – rose to 76.7 at the end of March 2021 from 64.2 a month earlier, and stood above that of 71.5 reported in the euro area.

This increase reflects the introduction of several containment measures during the month.

In February, industrial production and the volume of retail trade contracted at a faster pace compared with the previous month.

The number of commercial permits issued rose following a contraction a month earlier, while residential permits issued fell, but at a slower annual rate than in the previous month.

The number of registered unemployed persons declined compared with January, while the unemployment rate remained unchanged from a month earlier.

Inflation remained very low in February, with the annual inflation rate based on the Harmonised Index of Consumer Prices edging down to 0.1 per cent and that based on the Retail Price Index standing at 0.2 per cent.

The Economic Update also reports on recourse to the moratorium on loan repayments offered by domestic credit institutions to residents of Malta in response to COVID-19.

The value of household and corporate loans subject to a moratorium at the end of February edged down further, to €656.9 million, equivalent to 5.5 per cent of related outstanding loans.

This suggests that some businesses and households resumed their loan repayments.

By the end of February 2021, 558 facilities for working capital purposes had been granted under the Malta Development Bank COVID-19 Guarantee Scheme to businesses impacted by the pandemic, corresponding to total sanctioned amounts of €420.1 million, or around 54 per cent of the scheme’s target size.