Maltese firms plan to invest more amid sustainability and digitalisation push

The net balance of firms in Malta planning to increase investment rose significantly to 27 per cent in the fourth quarter of 2024, up from zero per cent in the previous quarter, according to the latest Business Dialogue report by the Central Bank of Malta.

This surge in investment plans is largely driven by a focus on sustainability and digitalisation, with firms across various sectors prioritising operational efficiency and resilience.

The report, which summarises insights from 45 interviews conducted between October and December 2024, provides an overview of business conditions, short-term activity expectations, cost and price changes, investment and employment plans, and wage growth projections.

Investment trends

Investment activities during the final quarter of 2024 reflected a clear shift towards resilience and innovation.

Companies in manufacturing are focusing on automation and energy efficiency to capitalise on the digital and green transition. Meanwhile, service providers are prioritising digitalisation and IT upgrades, along with refurbishments aimed at enhancing service delivery and customer experience. Retail companies are planning additional outlets and refurbishing existing ones, while construction firms are investing to diversify their revenue streams.

Despite the enthusiasm for investment, regulatory and market uncertainties have led some firms to delay major capital expenditures in favour of incremental improvements.

Financing conditions remain largely favourable, aided by lower borrowing costs, but challenges persist, particularly for smaller enterprises with limited access to diversified funding sources. As a result, self-financing remains the preferred method for 43 per cent of firms, while only 14 per cent sought bank loans. A further 32 per cent used a combination of financing sources to mitigate risk, though corporate bonds were notably absent from funding options.

Employment growth continues amid labour shortages

Employment levels continued to grow in the fourth quarter of 2024, albeit modestly.

The net share of businesses planning to increase their workforce rose slightly from 22 per cent to 24 per cent. Sectors such as tourism, audit, and consultancy are expected to drive employment growth, whereas some manufacturing subsectors are taking a more cautious approach, focusing on optimising productivity while still expressing a need for new hires. In contrast, employment in wholesale, retail, and construction is expected to stabilise in the coming months.

Labour shortages remain a significant challenge, with firms struggling to attract and retain skilled workers despite offering competitive wages. The competition for talent has intensified, prompting businesses – especially in the services sector – to adopt innovative recruitment and retention strategies, including flexible work arrangements and enhanced benefits packages.

These measures are intended to address immediate workforce needs while positioning companies as attractive employers in an increasingly competitive market.