Economic update by the Central Bank of Malta

Most of the data reported in this issue of the Economic Update refer to April 2020 and coincide with the peak of containment measures related to COVID-19. However, the latest data for the European Commission’s Economic Sentiment Indicator (ESI) and the Bank’s Business Conditions Index (BCI) refer to May. Hence, these two indicators may partially already reflect the impact of relaxation measures that became effective on 4 and 22 May. Meanwhile, tourism data for April have not been published by the National Statistics Office as airports and ports have been closed since March. 

In May, the Central Bank of Malta’s BCI fell slightly when compared with the previous month, suggesting that economic conditions remain significantly below their long-term average.   

By contrast, the ESI rose when compared with the previous month as confidence improved across almost all sub-components, particularly in the construction sector.  However, sentiment among retailers fell. Despite the improvement in sentiment compared to April, the ESI remains well below the historical average and still suggests low confidence levels.

In April, the volume of retail trade contracted significantly in annual terms.  Similarly, growth in industrial production turned negative. 

The unemployment rate rose as the number of registered unemployed increased further. However, the unemployment rate remains low from a historical perspective.

Consumer price inflation eased in April. The annual inflation rate based on the Harmonised Index of Consumer Prices fell to 1.1%, while inflation based on the Retail Price Index edged down to 0.8%.

The publication also looks at public finance developments and notes that the deficit on the cash-based Consolidated Fund widened significantly compared with a year earlier, reflecting a significant rise in government expenditure and a large drop in revenue in view of COVID-19.

It also reports 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 at the end of April was €1.3 billion, equivalent to 11.3% of related outstanding loans.

The full Economic Update, which also reports on international trade and financial markets, is available here.