Malta’s business activity above 20-year average in December, but economic sentiment remains low

Malta’s business community reported decent activity in December 2022, but general economic uncertainty continued to weight heavily on stakeholders, with economic sentiment remaining below its long-term average despite a slight increase over the level reported in November.

The latest Central Bank of Malta economic update shows that, compared to November, price expectations increased in the services sector, but fell across the remaining sectors.

The European Commission’s Uncertainty Indicator for Malta decreased in December, signalling lower uncertainty. Uncertainty fell mostly in the services sector, with smaller decreases recorded among consumers and in the retail sector. By contrast, uncertainty increased in industry and the construction sector.

In November, both industrial production and the volume of retail trade rose in annual terms.

The unemployment rate stood at 3.2 per cent in November, marginally higher than that registered in October, and a year earlier.

Commercial building and residential permits increased in November relative to their year-ago levels. In December, both the number of promise-of-sale agreements and final deeds of sale fell on a year-on-year basis and were also lower in month-on-month terms.

This prompted audit firm KPMG to sound the alarm over slowing property sales, although this was dismissed by leading developers and real estate agents who pointed to the generous subsidies that led to a busier-than-normal market in 2021, making it difficult to determine real trends from comparisons.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 7.3 per cent in December, marginally up from 7.2 per cent in the previous month. Inflation based on the Retail Price Index (RPI) also increased, standing at 7.4 per cent in December, up from 7.1 per cent in November.

In November 2022, the Consolidated Fund recorded a smaller deficit when compared with a year earlier, as government revenue increased at a faster pace than expenditure.

Annual growth in residents’ deposits rose at a faster rate of seven per cent in November. Meanwhile, annual growth in credit to Maltese residents slowed down marginally, to eight per cent.

By the end of the month, 622 facilities were approved and still outstanding in terms of the Malta Development Bank (MDB) COVID-19 Guarantee Scheme, corresponding to total sanctioned amounts of €482.6 million. By November, three loan facilities were approved under a new MDB Subsidised Loans Scheme aimed at importers and wholesalers of wheat and animal feeds, with the total amount of sanctioned lending standing at €14.2 million. By contrast, no facilities were approved under the MDB’s Liquidity Support Guaranteed Scheme (LSGS) launched in response to the Ukraine crisis.