Business conditions decline in Q3 2024, stability maintained amid cost pressures

The latest business dialogue held between the Central Bank of Malta and non-financial corporations shows that in the third quarter of 2024, the net share of firms reporting better business conditions weakened when compared to the previous quarter yet, most firms maintained stable levels of operations despite cost pressures. In the third quarter, this share stood at 15%, down from 36% in the second quarter of the year. Sectors such as construction, real estate, and services reported robust activity, while others, particularly retail and wholesale, faced pressure due to rising costs and subdued consumer demand.

Looking ahead, a net 37% of firms expected an improvement in short-term business activity, lower than 46% in the preceding quarter. Construction and real estate firms foresee continued improvement, and the services sector anticipates steady growth. The manufacturing industry remains optimistic, though expectations in the retail and wholesale sectors are more tempered.

The net share of companies reporting higher input costs increased. Indeed, a net 63% of contacts reported that input prices have increased in recent months, up from 54% in the previous period. The net share of firms reporting higher selling prices stood at 41% in the third quarter of 2024. These increases are, however, much lower than those reported in the last few years.

The net share of firms planning to invest more dropped to 0%, from 30% in the previous quarter, as the number of firms planning to invest less equaled those planning to invest more. The net share of firms planning to increase their staff complement decreased to 22%.Companies have continued to express concerns about labour and skill shortages, and pressures to increase wages.

This publication also incorporates a box providing insights about the developments in Malta’s tourism industry and hotel sector. The latest data shows tourism growth, with 2.4 million tourists visiting between January and August 2024, a 21.1% increase over the same period of last year. Despite this, contacts in the 5-star hotel segment reported challenges, including a shift toward lower-tier accommodations due to inflation and competition, putting pressure on 5-star occupancy and rising operational costs. Meanwhile, the 3- and 4-star segments have maintained stable occupancy but also face rising costs and increased competition.

The full publication is available here. The Business Dialogue survey can also be accessed in a new and interactive way through its dedicated dashboard.