Silvan Mifsud is director of Advisory at EMCS Tax & Advisory
Recent publications from the Central Bank of Malta provide some interest insights about the present realities of Malta’s economy.
On the 27th April, the Central Bank issued its Business Dialogue publication which outlines how the labour market is likely to develop in the coming months, as per below quotation from this publication.
When asked about employment plans, the responses collected reveal that the demand for labour remains robust. However, for the first time since the second quarter of 2022, the expected pace of hiring has declined when compared to the previous quarter. In fact, in the latest round of contacts, a net 46% of respondents anticipated higher employment, 12 percentage points lower than in the previous quarter. This reflects a drop in the share of companies reporting increased employment plans and a rise in the share of firms planning to shed labour. In fact, 8% of the companies interviewed reported that they plan to decrease their staff levels. This was the highest share recorded since the first quarter of 2021. These companies noted that they will not be renewing the employment contract of workers that are still on probation and not replacing anyone who resigns. This was attributed to a combination of factors including softening demand and operational restructuring.
As can be seen below it seems the Services and Manufacturing sectors are the sectors indicating a stronger reduction in employment intentions, with the first small signals from the Wholesale & Retail sector.
The same report also likely gives an insight as to why such a reduction in the robust demand for labour is starting to decline. During the first quarter of 2023, the companies interviewed were asked to rank the main problems or challenges that are or may be restricting the success of their business. The top main challenge reported by the companies in the first quarter of 2023 related to the availability of skilled workers (27%), with the services and manufacturing sector leading the pack with this problem. It is likely that these sectors are finding alternative ways of doing more with less or at least with the available resources. This could mean that companies in these sectors are focusing on how to generate more efficient operations and possibly how to invest in technologies that could make them less reliant on human resources.
Another interesting publication was issued by the Central Bank on the 28th April, this being the last economic update. This update has outlined a dissonance between future expectation coming out from businesses in various sectors and consumers, as cam be clearly seen below.
Whilst on one hand the retail, services and industrial confidence indicators improved, the consumer confidence continued to worsen in March 2023, from the level registered in February 2023. The development in consumer confidence mainly reflected a more negative assessment of the general economic situation over the next 12 months as well as consumers’ assessment of their financial situation over the last 12 months.