Summer snapshot of Maltese economy reveals mixed – but generally positive – situation

The latest snapshot of the Maltese economy reveals a mixed situation as the growth experienced through the post-COVID recovery is hampered by rising inflation and an uncertain international security environment. Meanwhile, unemployment was at its lowest ever level in June, highlighting the difficulties many employers are finding when in sourcing labour.

Government policy and activity continues to play a pivotal role in economic performance, according to the Central Bank of Malta’s economic update.

Both the CBM’s Business Conditions Index and the European Commission’s Confidence Survey recorded average results.

The Business Conditions Index for July indicates that annual growth in business activity is at its long-term average, estimated since January 2000.

Meanwhile, the European Commission’s Confidence Survey shows that economic sentiment in Malta edged down in July when compared with a month earlier, but stood at its long-term average, which is estimated since November 2002.

When compared with June, sentiment deteriorated in all sectors covered by the survey, except in the retail sector.

Additional survey information shows that, compared to June, price expectations fell in the services sector and among consumers, but rose in the remaining sectors.

The European Commission’s Uncertainty Indicator for Malta decreased when compared with June, signalling lower uncertainty. This was driven by developments in services and industry, as uncertainty rose among consumers, and to a smaller extent, in the retail sector.

In June, industrial production contracted in annual terms, though at a smaller rate when compared with May. Meanwhile, the volume of retail trade rose at a slower pace than in the previous month.

The unemployment rate fell marginally to three per cent when compared with May and also stood below last year’s rate. The rate observed in June 2022 was, in fact, the lowest ever recorded.

Residential permits rose in June relative to their year-ago levels, while commercial permits declined. In July, both the number of promise-of-sale agreements and final deeds of sale fell on a year-on-year basis.

This was to be expected, as the real estate sector benefitted from a number of attractive incentives in 2021.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 6.8 per cent in July, up from 6.1 per cent in the previous month. Inflation based on the Retail Price Index (RPI) also rose, reaching 6.8 per cent in July from 6.2 per cent a month earlier.

In June 2022, the deficit on the Consolidated Fund narrowed substantially when compared with a year earlier as Government revenue rose while Government expenditure decreased.

Annual growth in residents’ deposits remained strong in June, rising by 9.8 per cent. Meanwhile annual growth in credit to Maltese residents rose marginally to seven 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 June, three loan facilities were approved under a new MDB Subsidised Loans Scheme aimed at importers and wholesalers of wheat and animal feeds, covering total sanctioned lending of €15.6 million.

In June, the MDB launched the Liquidity Support Guaranteed Scheme (LSGS) to provide additional liquidity support in response to the Ukraine crisis. This scheme consists of two measures: LSGS-A provides bank financing support to all undertakings affected by the crisis, while LSGS-B is specific to fuel and oil importers. No facilities were approved by June.