Business conditions decline to 2009 recession levels, Central Bank of Malta study shows

Business conditions in April were comparable to those during the economic recession of 2009, the Central Bank of Malta has said.

The Central Bank's May economic update indicates that, in April, the Business Conditions Index declined when compared to March.

This suggests notably weaker levels of economic activity compared to the long-term average, the Central Bank said in a press statement on Friday.

Most of the data in the economic update refers to March 2020, which coincides with the first phase of COVID-19 cases in Malta and the intensification of the related containment measures.

In March, tourism activity contracted sharply as a result of travel restrictions introduced on 21 March in response to COVID-19. 

The volume of retail trade also contracted, though by far less than tourism activity. 

Meanwhile, growth in industrial production slowed down.

Unemployment up, but rate remains historically low

The number of registered unemployed increased in March. However, the unemployment rate remained low from a historical perspective.

Consumer price inflation edged up in March, though still remaining at low levels, with the annual inflation rate based on the Harmonised Index of Consumer Prices rising to 1.2%. 

Similarly, inflation based on the Retail Price Index rose slightly to 1.1%.

When it comes to public finance, the deficit on the cash-based Consolidated Fund widened significantly compared with a year
earlier, partly reflecting the government’s decision to defer the collection of a number of tax revenue components in view of COVID-19.

It also reports on recourse to the moratorium on loan repayments offered by domestic credit institutions by the end of March in response to the pandemic. 

The value of household and corporate loans subject to a moratorium at the end of the month was €487 million, equivalent to 4.5% of related outstanding loans.