Central Bank charts 25 years of economic ups and downs

Malta’s economic history over the past quarter of a century can now be followed through a single indicator which charts the country’s major slowdowns, crises and periods of expansion.

The Central Bank of Malta has launched the New Business Conditions Index (BCI), a new measure designed to track changes in business conditions from January 2001 to February 2026.

Developed by Central Bank economists Laura Bigeni and Germano Ruisi, the index combines 28 weekly, monthly and quarterly economic indicators into a single reading. It is centred on zero, with positive readings indicating above-average economic activity and negative readings pointing to below-average conditions.

Beyond providing a snapshot of the current economy, the BCI offers a historical reconstruction of how Malta’s economy responded to some of the major shocks and transformations of the past 25 years.

A quarter-century of economic change

The index shows a prolonged period of below-average activity between 2001 and 2004.

This period followed the global downturn in the technology sector, including weaker microchip exports, while the September 11 attacks affected international travel. Malta was also undergoing industrial restructuring in sectors such as shipbuilding and textiles in the years leading up to EU accession.

Following the 2001–2004 slowdown, business conditions gradually recovered and shifted back into positive above-average territory.

The next major downturn was the 2008-09 global financial crisis. The BCI fell from 0.6 in early 2008 to -2.5 in May 2009 as foreign demand collapsed and unemployment increased.

A further, shorter-lived downturn followed in 2011, with the index reaching -1.2 amid concerns linked to the European sovereign debt crisis.

The picture then changes markedly. From 2014 onwards, the index records a prolonged period of economic expansion, reflecting the transformation of Malta’s economy during the second half of the 2010s.

The most dramatic movement in the entire series came with the Covid-19 pandemic.

Travel restrictions, the collapse in tourism and the shutdown of parts of the services economy pushed the BCI to its lowest recorded level of -3.6 in July 2020.

The rebound was almost as striking. As restrictions were lifted and economic activity resumed, the index climbed rapidly, reaching a record high of 2.9 in September 2021.

From 2022 through early 2026, the BCI continued to register above-average economic conditions, with the score settled into a stable, moderately positive range around +0.3 to +0.5 driven by strong employment growth, low unemployment and the recovery in tourism spending as important factors behind the sustained performance.

Setting the record straight

One of the purposes of the new indicator is to make this historical record more robust.

Economic statistics are frequently revised as more information becomes available. This can create a problem when an indicator is used to compare current conditions with the past, since revisions to historical national accounts can alter earlier readings.

The Central Bank points to the example of 2020 GDP growth, which was initially estimated at -8.0% but was later revised to -3.3%.

Under the bank’s previous nine-variable model, revisions of this kind could significantly change historical index readings.

The new BCI spreads its assessment across 28 indicators, including commercial lending, trade flows, employment trends and business sentiment.

According to the Central Bank, this makes the new index around 40% less sensitive to statistical revisions.

This is intended to allow the economic story told by the index to remain relatively stable even as individual national accounts figures are revised.

A monthly economic gauge

The Central Bank intends to incorporate the New BCI into its routine monthly economic communications, giving policymakers and the public a regularly updated assessment of business conditions.

The index is therefore designed to serve two purposes: providing a timely reading of where Malta’s economy stands today, while also offering a more stable way of looking back at how economic conditions have changed over a 25-year period marked by global crises, EU accession, rapid economic expansion and the unprecedented Covid pandemic shock.