Central Bank Malta issues October Economic update

In September, the Bank’s Business Conditions Index remained positive, as most macroeconomic variables continued to recover from the very low levels observed in 2020. Nevertheless, the level of aggregate economic activity remained below prepandemic levels.

The European Commission’s confidence survey shows that sentiment fell in September compared with a month earlier, but remains well above its yearago level and its long-term average. When compared with August, confidence fell in industry and to a lesser extent among consumers. Nevertheless, sentiment remained positive in all sectors.

The 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 – remained unchanged from its level a month earlier and stood marginally above that reported in the euro area.

In August, commercial and residential permits rose on their year-ago level. Meanwhile, the number of final deeds of sale for residential property also rose on an annual basis while promiseof-sale agreements decreased. In the same month, industrial production contracted on an annual basis following four months of consecutive growth.

However, the volume of retail trade rose at a faster pace.

The number of registered unemployed persons declined both when compared with July and when compared with a year earlier. The unemployment rate remained unchanged at 3.2% in August, marginally below its pre-pandemic level.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 0.7% in September, up from 0.4% in August, while that based on the Retail Price Index rose to 2.2% from 2.1% a month earlier. The difference between the two measures of inflation reflects technical factors related to the revision of HICP weights in 2021.

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 COVID19. The value of household and corporate loans subject to a moratorium at the end of August edged down further, to €63.3 million, equivalent to only 0.5% of related outstanding loans. This reflects a recovery in income flows and the expiration of the moratoria period for certain beneficiaries. By the end of August 2021, 625 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 €478.6 million, or 61.5% of the scheme’s target size.

The full Economic Update is available online