Malta’s economic situation showed signs of improvement in August and September compared to previous months but the pandemic is still having a great impact, the Central Bank said on Wednesday.
In a statement, the Central Bank said most of the data published in a new report referred to August 2020 and reflected the effects of the lifting of restrictive measures related to COVID-19 before the summer.
However, as from August 19, some containment measures were re-introduced following a spike in infections which did have an impact.
In September, the Central Bank's Business Conditions Index, which gives a snap shot of how easy it is to do business on the island, improved slightly when compared with the previous month, indicating that economic conditions are bottoming out.
However, the index continued to signal low levels of economic activity.
Spenders' sentiment improves
The Economic Sentiment Indicator, which gives an idea of how willing people are to spend money, edged up when compared to the previous month, but remained well below pre-pandemic levels.
The increase in this indicator mostly reflected improved sentiment in the services sector and in industry and, to a lesser extent, in the construction sector and among consumers.
By contrast, confidence fell among retailers.
In August, industrial production and the volume of retail trade fell in annual terms. The rate at which industrial production dropped was slower, however, than that registered just a few weeks earlier in July.
Residential building permits climb for first time in months
The number of development permits for commercial purposes was significantly below the level recorded in August 2019.
But, by contrast, the number of residential development permits issued in August rose for the first time in seven months.
The number of registered unemployed and the unemployment rate fell in August when compared to the previous month, with the latter remaining relatively low from a historical perspective.
Inflation remained low in August and eased further in September.
The annual inflation rate based on the Harmonised Index of Consumer Prices closed the third quarter at 0.5%, while inflation based on the Retail Price Index edged down to 0.2%.
Compared to the surplus observed a year earlier, the government’s cash-based Consolidated Fund recorded a deficit in August.
This, the Central Bank said reflected the drop in tax revenue from lower economic activity due to the global spread of COVID-19.
The Central Bank also reported on the recourse to the moratorium on loan repayments being offered by domestic banks. The value of household and corporate loans subject to a moratorium at the end of August edged up to €1.9 billion, equivalent to 16.9% of related outstanding loans.
In April, the government launched the Malta Development Bank COVID-19 Guarantee Scheme, to guarantee new loans for working capital granted by credit institutions to businesses impacted by the pandemic.
At the end of August, 412 loans – corresponding to total sanctioned amounts of €285.1 million – had been approved.
The Central Bank’s full Economic Update is available here.