Business News 

Central Bank’s Business Conditions Index registers slight improvement

21st October 2020

Overall low levels of economic activity persist, but may be ‘bottoming out’

In September, the Central Bank of Malta’s Business Conditions Index improved slightly over the previous month, indicating that “economic conditions are bottoming out”. The Index nonetheless continued to signal low levels of economic activity overall.

The Economic Sentiment Indicator also registered a slight improvement in September, mainly through increased confidence in the services and industry sectors, as well as, to a lesser extent, in the construction sector and among consumers. On the other hand, retailers expressed less confidence than in August. The Central Bank noted that, “Sentiment remained negative in all sectors.”

Although inflation pressure was low in August and eased further in September, with the inflation rate based on the Harmonised Index of Consumer Prices at 0.5 per cent, and the inflation based on the Retail Price Index an even lower 0.2 per cent, this will be of little comfort to producers and retailers, who saw volumes continue to fall.

Striking a cautious note of positivity, the Central Bank pointed out that the decline in the volume of retail trade was slower in August than in July.

The positive tone continued as the Bank noted that the number of residential development permits issued in August rose for the first time in seven months.

The number of registered unemployed and the unemployment rate fell when compared with the preceding month, with the latter remaining relatively low from a historical perspective.

The publication also reports on recourse to the moratorium on loan repayments offered by domestic credit institutions to residents of Malta in response to COVID-19.

It states, “The value of household and corporate loans subject to a moratorium at the end of August edged up to €1.9 billion, equivalent to 16.9% of related outstanding loans. In April, the Government launched the Malta Development Bank COVID-19 Guarantee Scheme, to guarantee new loans for working capital granted by credit institutions to businesses impacted by the pandemic. As at end August, 412 facilities ¬– corresponding to total sanctioned amounts of €285.1 million ¬– were approved.”

*It is pertinent to note that the Economic Update is made up of different elements utilising different data sources. Thus, while the Business Conditions Index and the European Commission’s Economic Sentiment Indicator refer to data from September, most of the other items refer to data collected in August.

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Central Bank’s Business Conditions Index registers slight improvement