Economic sentiment reaches historical low amongst retailers

Miguela Xuereb

During the month of July, the Central Bank of Malta’s Business Conditions Index, BCI, improved slightly when compared with the previous month, suggesting that economic conditions may have reached their trough. However, the index remained significantly below its long-term average.

According to the latest Economic Update issued by the Central Bank of Malta, CBM, the Economic Sentiment Indicator, ESI, edged up when compared with the previous month, while remaining well below pre-pandemic levels.

The Central Bank of Malta explained that most of the data reported in the latest issue of the Economic Update refer to June 2020 and thus reflect the impact of the lifting of restrictive measures related to COVID-19 as from May. However, it was also noted that the latest data for the European Commission’s Economic Sentiment Indicator and the Bank’s Business Conditions Index refer to July 2020.

Meanwhile, tourism data for April, May and June have not been published by the National Statistics Office as the airport and seaport were closed in those months.

It was explained that the increase in the ESI mostly reflects improved sentiment in the services sector and in industry. Sentiment also improved in the construction sector and among consumers but reached a new historical low among retailers. In all other sectors, the sentiment is either above or only marginally below the long-term average.

According to the latest report, during June this year, the volume of retail trade and industrial production fell in annual terms, although the rate of contraction was smaller when compared to that in May. Annual growth in development permits for both commercial and residential purposes remained negative, though the number of residential permits issued since the start of the year remains above the historical average.

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

The latest issue of the Economic Update gives also an overview on consumer prices which have edged up marginally in June but inflation remains at low levels.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) rose to 1.0% in June, from 0.9% in May, while inflation based on the Retail Price Index (RPI) stood unchanged at 0.7%.

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.

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

The value of household and corporate loans subject to a moratorium at the end of June was €1.7 billion, equivalent to 15.0% of related outstanding loans.

In April, the Government launched the Malta Development Bank COVID-19 Guarantee Scheme (CGS) for the purpose of guaranteeing new loans granted by credit institutions for working capital purposes to businesses impacted by the pandemic. As at end June, 255 facilities corresponding to total sanctioned amounts of €161.1 million were approved.

If you want to be the first to receive the latest news on the coronavirus in Malta, download the Newsbook APP here.