Malta is the only country in the EU with a negative investment outlook, with businesses expecting to decrease their investment remaining slightly higher than those looking to increase it, a survey by the European Investment Bank has found.
The 2021 investment survey found that while fewer firms had invested during 2020, their outlook toward future investment had substantially improved in the latest survey.
Maltese firms spent some 44% of their investments on replacement, in line with the EU average, while the highest share of investment was otherwise made in machinery and equipment (38%) followed by software, data and IT (22%), which increased by seven percentage points in the span of a year.
COVID-19, the survey found, proportionally had a much stronger impact on Maltese businesses than their European counterparts, with 58% of companies saying that their sales had declined compared to the beginning of 2020. The EU average stood at 49%.
While 31% of Maltese investment firms revised their investment plans downward due to the pandemic, more than half (55%) said they had in turn made investments to become more digital as a short-term response to COVID-19 restrictions.
The pandemic, the survey found, is expected to continue having an impact on firms’ investment plans.
Some 54% of those surveyed are expecting to see an increase in the use of digital technology, up from 46% in 2020. Businesses also saw a sharp decline of businesses who said they were operating at or above full capacity, from 69% in 2020 to 42% in 2021.
However, despite pandemic challenges, 82% said they had invested just the right amount in the preceding three years while 35% cited expanding their capacity as their top investment priority.
More than a third (35%) of firms said they introduced new products and services as part of their investment activities for the year, while some 9% expanded a product or innovation on the global market. Two-thirds of the firms surveyed said they had implemented one advanced digital technology technique as part of their investment.
Overall, the survey found Maltese firms to be optimistic about the economic climate, their business prospects and the availability of both internal and external finance. Uncertainty about the future was the top-cited perceived barrier to investment ((84%) followed by the availability of skilled staff (82%).
Access to finance in Malta was found the be slightly worse than in the rest of the EU, with 9% of firms considering themselves finance-constrained, while the EU average stood at 5%. Overall firms were satisfied with their use of external finance. The highest proportions of dissatisfaction were with collateral requirements (16%) followed by the length of the repayment period (10%).
Some 74% of Maltese firms received public support in response to the COVID-19 pandemic, the majority (59%) in the form of subsidies or financial support that does not need to be paid back, far above the EU average of (36%).
When it comes to climate change, Maltese firms were less likely (44%) to feel the impact on their business than the EU average (58%). Despite this, the share of Maltese firms who see a transition to stricter climate standards as an opportunity is higher than those who view it as a risk (32% and 26% respectively).
Some 42% of Maltese firms said they have already invested to deal with climate change while 43% have plans to do so in the next three years. Around 29% invested in energy efficiency, lower than in 2020 when it stood at 42%. Additionally, some 53% of Maltese firms have set and monitored goals for reducing carbon emissions and energy consumption.
Addressing a discussion on financing green projects organised by the Central Bank of Malta, governor Edward Scicluna said banks could be paving the way to facilitating green investment by creating the regulatory framework to support them.
“It is important that financial institutions take the lead in driving this essential culture change. It will not be an easy transition but we need to rise up to the challenge,” he said.
“Such projects require significant investment in order to drive successful interventions that can serve to cushion energy dependence.”
“There is no room for complacency and war cannot be addressed by constant fiscal support. A calm adjustment over time would be far better than a quick and disordered one.”
Energy Minister Miriam Dalli said that driving green investment needs to be seen as a driver and not a detriment to long-term economic projects.
“We need to make sure that the right financial structures are in place and properly directing the financial green transitions that are needed to embrace decarbonisation,” she said.
“Our generation has a historic responsibility to lead towards cleaner and fairer economic prosperity and keep the planet livable for ourselves and our future generations.”
“The challenge is huge but the risk of inaction is greater. We need to make sure that we are directing capital through the plumbing that flows towards truly green projects and not just potential ones. We can step up and make sure such financing is quick and efficient.”