Fewer household loans subject to moratorium but hotels, restaurants remain worst hit

The Economic Update released by the Central Bank of Malta shows a decline in loans subject to a moratorium except those taken out by hotels, restaurants • Economic sentiment declines

Household loans subject to a repayment moratorium declined in September but hotels and restaurants continued to feel the pinch
Household loans subject to a repayment moratorium declined in September but hotels and restaurants continued to feel the pinch

Loans subject to a moratorium declined in September, suggesting that some businesses and households restarted regular repayments, a Central Bank of Malta report out today shows.

In its latest Economic Update, the CBM noted that 8,335 loans, amounting to €1.8 billion, were subject to a moratorium by the end of September. These include loans falling under the Malta Development Bank COVID-19 guarantee scheme.

The loans subject to a moratorium made up 15.6% of all outstanding bank lending.

The CBM issued a directive on loan moratoriums in April but some lending institutions had already offered clients the possibility in March when the COVID-19 pandemic hit.

The moratorium was intended to leave more liquidity in the hands of businesses and households as they faced falling incomes because of the pandemic.

Hotels, restaurants worst hit

The CBM said this was the first monthly decline in loans subject to a moratorium but the decrease was not uniform across all sectors.

While the largest declines were observed in the household, transportation and storage, and real estate sectors, the accommodation and food services sector continued to witness an increase in the amount of loans subject to a moratorium.

The accommodation and food services sector had 439 loans subject to a moratorium, which equates to 55% of all lending by operators in the field. The value of loans subject to a moratorium stood at €258.2 million.

“This suggests that this sector remains in dire need of liquidity,” the CBM said.

Hotels, restaurants and bars sustained the brunt of restrictive measures introduced over the past three months as COVID-19 cases started to surge again.

Household loans

The report shows that there were 6,022 household loans subjected to a moratorium by the end of September amounting to 8.8% of all household lending.

The value of household loans subjected to a moratorium stood at €554 million.

Economic sentiment declines

The Economic Sentiment Indicator published with the report signalled a drop when compared with the previous month, possibly reflecting the rise in COVID-19 infections and the introduction of new containment measures in October.

“Lower sentiment was largely driven by a significant decline in confidence in the services sector and, to a more limited extent, in the construction sector and among consumers. By contrast, sentiment improved in industry and among retailers. Nonetheless, confidence remained negative in all sectors,” the CBM said.