What are Malta’s businesses expecting over the next three months? Central Bank survey sheds light

A Central Bank of Malta (CBM) survey which seeks to assess local business sentiment and maintain a process of dialogue has found that short-term expectations for activity have declined slightly.

In addition, investment plans have largely remained on track, firms plan additional recruitment, and concerns surrounding labour shortages and cost pressures remain.

The survey was carried out in the fourth quarter of 2021, with non-financial corporations. This period was characterised by rising COVID-19 daily cases and added restrictions, and it was found that “business conditions softened, with a lower net percentage of firms reporting an improvement in activity over the three months preceding the interview [third quarter 2021].”

It was found that this share decreased from 49 per cent in Q3 to 36 per cent in Q4 2021. During the final three months of 2021, 57 per cent of firms contacted reported higher activity, while 21 per cent reported a decrease.

Almost half of the firms interviewed by the CBM reported that they expect business activity to expand over the next three months, while 16 per cent anticipated a decline. A net share of 33 per cent expected an improvement in near term business activity, slightly down from 37 per cent in the third quarter. Meanwhile, the share of contacts reporting that the outlook was uncertain receded marginally.

Rising Costs

Cost pressures have remained elevated in the quarter under review, the CBM noted, with almost three-fourths of contacts reporting that input prices have increased and no firm mentioning price decreases.

In part due to elevated cost pressures, 47 per cent of firms interviewed reported an increase in their selling prices, with an equal percentage reporting unchanged prices. Only 6 per cent of respondents reported decreases in selling prices.

Investment & Recruitment

In the fourth quarter, 78 per cent of respondents claimed to have continued their investment plans as scheduled, while 14 per cent reported postponement. The share of respondents that cancelled investment plans fell marginally to two per cent.

In view of positive conditions, a net 38 per cent of firms plan to increase their staff complement, marginally above 37 per cent in the previous quarter. However, firms have continued to express concerns about labour shortages, the CBM underscored.

Beyond the survey

Beyond the survey, a lifting of restrictions in the form of no vaccine certificate needed anymore to access a range of businesses throughout February and the rapid roll out of the booster dose for the COVID-19 vaccine bodes well for economic activity to continue with fewer disruptions.

Currently, Malta’s daily COVID infections are receding from the highs being experienced in December and early January, with the number of active cases at 3,946 as of Thursday, down from an all time high of 15,065 on 6th January.

In addition, Deputy Prime Minister and Health Minister Chris Fearne has confirmed that two-thirds of Malta’s adult population has not received their booster dose.