Economic sentiment moderates but remains around its long-term average

Economic activity in Malta has moderated somewhat. The Bank’s Business Conditions Index indicates that in April, annual growth in business activity moderated towards its long-term average. Meanwhile, industrial production contracted in March, while year-on-year growth in retail trade moderated. Services output rose in February following declines in the preceding three months. On the other hand, tourism activity in March grew more moderately than in previous months.

Despite remaining above its long-term average, economic sentiment weakened as confidence in the industry and the services sectors declined. On balance, according to the European Commission’s Economic Uncertainty Indicator, there was less economic certainty surrounding decisions made by respondents in April.

Supply and demand conditions in the property market remain strong. In April, residential permits were higher on a year earlier, but commercial permits were lower. Meanwhile, both the number of residential promise-of-sale agreements and the number of final deeds of sale increased on a year earlier.

The labour market shows some signs of easing. In April, the European Commission’s Employment Expectations Indicator, fell below its historical average. The unemployment rate in March remained unchanged at 3.5% for the third consecutive month, though it was higher than the rate recorded in the same month a year earlier.

Malta’s inflation rate rose in April but stood well below that in the euro area. The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) edged up to 2.5% in April, while HICP inflation excluding food and energy remained unchanged at 2.4%. Across the euro area, HICP inflation was higher than that in Malta due to an increase in energy inflation. However, when excluding energy and food prices, HICP inflation in Malta was higher. According to the Retail Price Index (RPI), inflation in April edged up to 2.8%.

In March, the Consolidated Fund registered a larger deficit compared with that recorded a year earlier, due to higher expenditure coupled with a decline in revenue, brought about by lower tax receipts.

The annual rate of change of Maltese residents’ deposits rose, while credit grew at an unchanged annual rate in March, compared with February.

The full Economic Update is available here.