Economic Update: Issue 06/2021
In May, business conditions were positive, as the economy continued to recover from the Covid-19 economic shock. European Commission data, in fact, shows that sentiment was positive across all sectors – bar the retail sector, which stood marginally negative. Overall economic sentiment edged down in May, but remained above its long-term average.
The Central Bank’s estimate of the Covid-19 Government Response Index – a composite indicator that summarises various containment, economic and health-related measures introduced in response to the pandemic – fell to 66.7 at the end of May from 73.8 a month earlier but stood marginally above that of 66.2 reported in the euro area. This decline mainly reflects the continued easing of restrictions, which progressed as scheduled.
In April, growth in industrial production turned significantly positive after five consecutive negative readings, while the volume of retail trade rebounded strongly in annual terms.
The annual rate of change in the number of commercial permits eased compared with a month earlier, while that of residential permits turned positive. As regards residential property transactions, in May the number of final deeds and promise-ofsale agreements rose sharply on an annual basis. This strong increase reflects base effects from the declines experienced last year during the partial lockdown, as well as government schemes intended to support the property market.
The number of registered unemployed persons fell compared with March and compared with a year earlier, while the unemployment rate remained unchanged from a month earlier, well below the historical average.
The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood unchanged at 0.1% in April, while that based on the Retail Price Index accelerated to 0.9%. The difference between the two measures of inflation reflect technical factors related to the drop in the weight of tourism-related items included in the HICP.
The Economic Update also includes data 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 edged down further, to €281.8m, equivalent to 2.3% of related outstanding loans and about one-seventh of the extent of the moratorium at its peak in July 2020. This suggests a recovery in income flows and, for some, the expiration of the moratoria period. By the end of April, 587 new facilities for working capital and loan repayment purposes had been granted to businesses impacted by the pandemic under the Malta Development Bank Covid-19 Guarantee Scheme, corresponding to total sanctioned amounts of €444.4m or 57.1% of the scheme’s target size.