Central Bank of Malta business dialogue publication – third edition of 2021

Meetings held between the Central Bank of Malta and local firms during the third quarter of 2021 show that:

• Overall business conditions have continued to improve

• Short-term expectations about business activity also improved

• Investment plans have largely remained on track

• Firms plan additional recruitment

• More firms have expressed concerns about labour

shortages

• Cost pressures have remained elevated, which in some cases has led to a rise in selling prices

In the third quarter of 2021, business conditions have continued to improve, with 65% of firms contacted reporting higher activity and 16% reporting a decrease. Thus, a net 49% of respondents reported an increase in activity over the three months preceding the interview, up from 28% in the second quarter.

Almost half of the firms interviewed reported that they expect business activity to expand over the next three months, while 11% anticipated a decline. Moreover, the share of contacts reporting that the outlook was uncertain receded further.

Cost pressures have remained elevated in the quarter under review, with almost two-thirds of contacts reporting that input prices have increased. In part due to elevated cost pressures, around 39% of firms interviewed reported an increase in their selling prices. However, 14% reported reductions in selling prices, while almost a half of the firms interviewed left selling prices unchanged.

In the third quarter, 73% of respondents claimed to have continued their investment plans as scheduled, while 14% reported postponement. The share of respondents that cancelled investment plans rose marginally to 3%.

In view of the increase in activity, a net 37% of firms plan to increase their staff complement. However, more firms during the quarter under review have expressed concerns about labour shortages.