The annual rate of inflation remained unchanged from September to October, a first for 2022, but economic sentiment took a hit across almost all sectors as fears of a downturn picked up speed. 

It is not just business owners that are expecting the worst: price expectations increased across all sectors, most notably among consumers.

But while cost of living concerns are gnawing at economic confidence, locals are still, by and large, saving up: Maltese residents’ deposits expanded at an annual rate of 8.4% in September, following an increase of 7.2% in the previous month, and the annual growth in credit to Maltese residents stood at 8.8% in October.

That data emerges from the Central Bank’s economic update for November, published on Friday.

The update provides a broad overview of the Maltese economy, public finances and economic sentiment throughout the country.

Confidence Data suggests consumers are among the most pessimistic about the economy’s prospects, with confidence indicators showing that they were less hopeful in October than they were in October 2020, at the height of the COVID-19 pandemic.

Industry confidence is also significantly negative, though it is marginally better than it was during the COVID crisis. Confidence across the construction sector was also negative in October, contrasting with the positive sentiment that pervaded the sector during the summer.

Sentiment is more upbeat within the services and retail sectors, with the latter rebounding strongly following strongly negative sentiment in August.

High uncertainty

The broadly negative sentiment can be at least partially explained by the high levels of uncertainty that pervade Malta’s economy.

An EU indicator designed to measure business and financial uncertainty, the EUI, trended up in October and now stands above that of the EU area.

The indicator’s October rate of 38.3 was more than double that of a year prior.

The Central Bank said the Services industry accounted for most of October’s increase. Economy More encouraging was a 13.5% annual growth in the index of industrial production, with firms in various sectors upping their productivity levels.

Tourism numbers continued to rebound and while the number of tourists remained below pre-pandemic levels, tourist spending almost matched those 2019 levels.