Business confidence bounced back in January across all economic sectors except for construction, according to the Central Bank’s economic update.

The rebound followed a significant dip across the board in December, when the country was caught in the midst of political uncertainty. 

In its second update for the year, Central Bank Malta said that in January, the Business Conditions Index suggested that economic conditions remained close to their long-term average.

Malta scored 99.9 on the European Commission's economic sentiment indicator in January, compared to 91 in December.

The January score is marginally lower than the average across all of 2019 - 100.7 - and lower than the highs of 2018, when sentiment averaged 112.4 on the EU scale. 

Confidence bounced back most strongly within the retail sector, which had reported the biggest knock in December. The sector however continues to report confidence levels lower than the 2019 average.

In services, confidence also remains below 2019 averages, although expectation for demand over the next three months is buoyant.

There is also significant optimism about production expectations for the coming months within the industrial sector and general positive sentiment about the economy among consumers, the indicators suggest. 

By contrast, confidence in the construction sector fell to 7.9 from 19.4 in December. Notwithstanding this decrease, it remained well above its long-term average of -11.8, the Central Bank said. 

The recent fall in sentiment was largely driven by a lower share of respondents expecting to hire workers, according to the economic update.

In December the Central Bank had predicted that Malta’s economy risked seeing private consumption slow down and investment postponed if the ongoing political crisis persisted.

Confidence has dipped in the construction sector. Photo: Chris Sant Fournier

Tourism, industrial production up

The Economic Update reports significant annual growth in the number of tourist arrivals and expenditure in December. 

The number of inbound tourists increased by 19.3 percent on a year earlier, following a 9.1 percent rise in November.

The index of industrial production and the volume of retail trade, which is a short-term indicator of final domestic demand, also rose at a faster pace in annual terms.

It increased by an annual rate of 5.6 percent, following a 3.5 percent increase in November.

Conditions in the labour market continued to be favourable. The seasonally adjusted unemployment rate fell marginally to 3.4 percent in December, from 3.5 percent in the previous month. 

The number of gainfully occupied continued to grow strongly, rising by 5.2 percent in August 2019. 

Public finance developments

In November of 2019, the Consolidated Fund recorded a deficit of €2.1 million - a drop of €8.8 million when compared to the deficit registered in November 2018. 

This occurred since a rise in revenue offset a rise in expenditure.

Meanwhile, indirect taxes increased by €27.5 million driven by higher receipts from all components, particularly from VAT. 

On the other hand, revenue from direct taxes fell by €20.6 million, mainly on account of lower income tax receipts.

According to the economic update, in November the total stock of government debt amounted to €5,305.3 million, an increase of €44.1 million when compared to a month earlier. This rise was mainly attributable to a new issue of Malta Government Stocks.