More than half of firms in Malta say they will invest less as a result of the COVID-19 pandemic, with around one-third delaying or cancelling planned investments, a European Investment Bank survey has found.
The EIB survey was carried out between May and August 2020.
It found that the most frequently mentioned long-term impact of COVID-19 on firms in Malta was the increased use of digital technologies (46%), especially within the construction and infrastructure sectors.
Those sectors also reported greater financing constraints, together with micro-companies, than other sectors.
As was the case across Europe, firms in Malta reported a dramatic increase in pessimism about the economic climate, finance availability and business prospects in their sector. Smaller firms are more pessimistic than larger firms about the availability of external finance and the regulatory climate.
While Maltese firms reported more investment than expected in 2019, the survey found that their investment expectations for 2020 were much worse than expectations EU-wide (-48% versus -28%).
The biggest long-term barrier to investment cited was uncertainty about the future (85%), an increase of eighteen percentage points over the previous year but in line with the EU average (81%).
Staff cuts
Almost one in every five firms surveyed (22%) said that they expected a permanent reduction in employment levels as a result of the pandemic. Service firms (27%) are more likely to expect a permanent drop in employment than manufacturing firms (11%).
Around one in four firms in the construction and infrastructure sector (24%), micro/small firms (22%) and medium or large firms (23%) also said they planned to permanently cut staff numbers.
The survey also looked at the adoption of digital technologies and investment in climate change mitigation.
Survey results were presented during a webinar organised jointly by the EIB and the Central Bank of Malta.
Attendees heard that while the pandemic had taken its toll on firms’ investment prospects, perceived obstacles to investment were lower than in the previous year, except for the prevailing general uncertainty and availability of finance.
The EIB group survey on investment and investment finance has been carried out annually since 2016 in all EU states, including Malta, and covers a sample of firms in the UK and the USA.
The webinar held on Monday, was one of a series being organised by the EIB in the member states.
A presentation on the Maltese economy was made by the bank’s head of the economic analysis department Rita Schembri.
It was also addressed by Finance Minister Clyde Caruana, while the opening remarks were made by the EIB’s vice-president Dario Scannapieco and the bank’s deputy governor Sandro Demarco.
Central Bank governor Edward Scicluna chaired a panel discussion with key stakeholders involved in investment finance and business transformation.
The panel discussion tackled some salient aspects with regards to economic recovery, starting with the understanding that a ‘new normal’ should be looked at, rather than assuming that things will simply go back to the way that they were prior to the pandemic.
The panelists also stressed the importance of investment – particularly when it comes to digitalisation and climate change – and the strengths of Malta’s regulatory environment.