Central Bank of Malta publishes first 2022 edition of business dialogue publication

Meetings held between the Central Bank of Malta and non-financial corporations during the fourth quarter of 2021 show that:

• Overall positive business conditions have softened somewhat.
• Short-term expectations about business activity declined slightly.
• Investment plans have largely remained on track.
• Firms plan additional recruitment.
• Firms have continued to express concerns about labour shortages.
• Cost pressures have remained elevated and are partly reflected in higher selling prices.

In the fourth quarter of 2021, positive business conditions softened somewhat, with a lower net percentage of firms reporting an improvement in activity over the three months preceding the interview. This share decreased from 49% in the third quarter to 36% in the final quarter of 2021. During the quarter under review, 57% of firms contacted reported higher activity while 21% reported a decrease.

Almost half of the firms interviewed reported that they expect business activity to expand over the next three months, while 16% anticipated a decline. A net share of 33% expected an amelioration in near term business activity, slightly down from 37% in the third quarter. Meanwhile, the share of contacts reporting that the outlook was uncertain receded marginally.

Cost pressures have remained elevated in the quarter under review, with almost three-fourths of contacts reporting that input prices have increased and no firm mentioning price decreases. In part due to elevated cost pressures, 47% of firms interviewed reported an increase in their selling prices, with an equal percentage reporting unchanged prices. Only 6% of respondents reported decreases in selling prices.

In the fourth quarter, 78% of respondents claimed to have continued their investment plans as scheduled, while 14% reported postponement. The share of respondents that cancelled investment plans fell marginally to 2%.

In view of positive conditions, a net 38% of firms plan to increase their staff complement, marginally above 37% in the previous quarter. However, firms have continued to express concerns about labour shortages.

This publication also includes a box that outlines initial insights gathered from a pilot survey with 17 companies on the impact of Brexit on firms. Slightly less than half of the respondents stated that they have been impacted negatively by Brexit, in particular, due to higher costs, more regulation, as well as longer delivery lead times.