Central Bank of Malta issues December Economic Update

The Bank’s Business Conditions Index shows that in November annual growth in business activity receded somewhat from recent historical highs, but remained strong from a historical perspective as economic activity continued to recover from the low levels recorded in 2020.

The European Commission’s confidence survey shows that sentiment eased in November compared with a month earlier, but remained well above its year-ago level and its long-term average. When compared with October, confidence fell in all sectors, with the exception of the services sector. Following recent developments, and in contrast to October, sentiment turned mildly negative in industry and in the retail sector.

The Bank’s estimate of the COVID-19 Government Response Index – a composite indicator that summarises various containment, economic and health-related measures introduced in response to the pandemic – remained unchanged from the levels recorded in the previous three months and stood marginally below that reported in the euro area.

In November, both the number of final deeds of sale for residential property and the number of promise-of-sale agreements rose on an annual basis. The latter were also higher than in November 2019.

In October, industrial production contracted on an annual basis for the third consecutive month. Meanwhile, the volume of retail trade rose at a slower, though still strong pace.

The number of registered unemployed persons declined both when compared with September and when compared with a year earlier. The unemployment rate rose marginally to 3.6% in October but remained below its pre-pandemic level.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 1.4% in October, up from 0.7% in September, while that based on the Retail Price Index (RPI) rose to 2.3% from 2.2% a month earlier. The difference between the two measures of inflation mostly reflects technical factors related to the revision of HICP weights in 2021. In November, both the annual HICP and RPI inflation rates rose to 2.4%.

The Economic Update also includes data on recourse to the moratorium on loan repayments offered by domestic credit institutions to residents of Malta in response to COVID-19. The value of household and corporate loans subject to a moratorium reached very low levels at the end of October. At €26.5 million, these were equivalent to only 0.2% of related outstanding loans. This reflects a recovery in income flows and the expiration of the moratoria period for a number of beneficiaries. By the end of the month, 652 facilities for working capital and loan repayment purposes had been granted to businesses impacted by the pandemic under the Malta Development Bank COVID-19 Guarantee Scheme, corresponding to total sanctioned amounts of €508.6 million, or 65.4% of the scheme’s target size.

The full Economic Update is available here.