European Investment Bank and Central Bank of Malta conference: Investment and Investment Finance – the case of Malta

As part of a series of events organised to debate current trends in investment in different EU Member States, the European Investment Bank and the Central Bank of Malta hosted a conference entitled “Investment and Investment Finance: The case of Malta” on Tuesday in Valletta.

Minister for Finance, Edward Scicluna, the Governor of the Central Bank of Malta, Mario Vella, and EIB Vice President Dario Scannapieco, spoke at the event that also involved the participation of economists, policymakers and representatives from financial institutions and the business community.

At the event, Debora Revoltella, Director Economics Department from the EIB, presented the new 2017 results of the annual EIB Investment Survey which, together with the EIB Investment Report, provides an overview of the cyclical and structural dynamics behind investment and investment financing in Europe, thereby facilitating an in-depth understanding of the investment situation in each EU economy.

The new EIB studies reveal that healthy, corporate investment in the EU is being driven by concerns with capital quality and competitiveness. At the same time public infrastructure investment is significantly below long-term trends, largely as a result of fiscal policy choices in many countries. It will indicate a need for greater investment in innovation and intangible capital, particularly including skills, and a re-focusing of public priorities towards investment in infrastructure to meet long terms structural needs.

Based on interviews 12,500 firms across all EU Member States, EIBIS provides valuable country-by-country information not available through quantity-based statistics, such as details on investment plans, perceived gaps, the quality of the capital stock, the nature of the investment, financing conditions and the issues impeding investment.

The questions are the same for all companies and relate to firm characteristics and performance, past investment activities and future plans, sources of finance, and challenges that businesses face. The results are analysed in detail in the EIB Investment Report. Malta through the lens of the EIB Investment Survey In Malta, the survey covers 178 firms and its second round broadly confirms the results of the first one: access to external financing is not a major concern overall for Maltese corporates and is unlikely to be a limiting factor for investment for most firms in the country. Indeed, some 6% of firms can be said to be “finance constrained”, which is slightly under the EU average.

84% of the firms in Malta invested in the last financial year, which also matches the EU average, and is higher than last year’s result in Malta (78%). Investment intensity (investment per employee) has also increased and this positive outlook is expected to continue overall.

Nonetheless, there are signs of slowing, with firms in the services sector and larger firms on balance expecting 2017 investment to be below that in 2016. Likewise, only 8% of firms in Malta reported investing too little over the last three years. The reported “investment gap” in Malta is the lowest across the EU.

With regard to the long-term drivers of investment, a lack of staff with the right skills continues to be the most commonly cited perceived barrier to investment (by 94% of the firms, with 78% considering it as a major obstacle – the highest figure in the EU). Public investment in transport was also a notable priority for firms in Malta.

Going forward, greater investment in skills and innovation, including the adoption of innovations, will be important for the Maltese economy, especially as firms’ productivity is lower than the EU benchmarks. The infrastructure sector has a relatively high share of firms in the higher productivity class, while the construction sector has a high share of firms in the lowest productivity class.

During his closing remarks, EIB Vice President Dario Scannapieco emphasised “the positive impact of EIB activity on the Maltese economy, contributing to a sustainable recovery by fostering investments, competitiveness and job creation.

“Since the EIB started its activity in Malta the EU bank has contributed to financing a wide range of projects, including in vital sectors such as telecommunications, education and health and energy, facilitating access to credit with favorable conditions. I am confident that this EIB survey will contribute to providing very valuable and useful information to continue our contribution to supporting the Maltese economy.”