28/10/2022

Central Bank of Malta Business Dialogue Publication – Fourth Edition of 2022

Dialogues held between the Central Bank of Malta and non-financial corporations during the third quarter of 2022 show that:

• Overall business conditions and expectations of activity for the next three months remain positive.
• Investment plans have remained largely on track.
• Firms plan additional recruitment but continue to express concerns about labour shortages and wage pressures.
• Cost pressures have remained elevated and broad-based. They are partly being reflected in higher selling prices.

In the third quarter of 2022, business conditions continued to improve. Indeed, the net percentage of firms reporting an improvement in activity over the three months preceding the interview increased marginally from 52% in the second quarter to 54% in the third quarter. During the quarter under review, 62% of firms contacted reported higher activity while 8% reported a decrease.

Looking ahead, expectations about business conditions are slightly more optimistic compared to the previous round of contacts. In fact, 44% of the firms interviewed reported that they expect business activity to increase in the next three months, while 10% anticipated a deterioration. Thus, a net share of 35% expected an improvement in short-term business activity, compared to 31% in the previous quarter.

Firms continue to be adversely affected by supply-chain disruptions and cost pressures, which have remained elevated in the third quarter of the year. Most companies were impacted by the war in Ukraine, mostly by higher import prices. Indeed, a net 88% of contacts reported that input prices have increased. This was the highest net balance since the survey began.

To an ad-hoc question referring to expectations of unit costs in the next 12 months, 28% of firms expected unit costs to remain unchanged, 35% foresaw increases of up to 5%, while around 22% of companies replied that they expect increases in costs in excess of 5%. Only 5% of firms expected unit costs to decrease.

The net share of firms reporting higher selling prices stood at 52% in the third quarter. This was down from 61% in the previous quarter. Around 24% of firms plan to increase prices by a lot.

In the third quarter of 2022, 83% of respondents reported to have continued with their investment as scheduled, while 3% said that they postponed their plans. The share of firms reporting that no investment was planned increased to 14%, compared to 3% in the previous quarter.

In view of positive business conditions, a net 48% of firms plan to increase their staff complement, up from 42% in the second quarter. This share is highest among real estate and construction firms. Businesses have continued to express concerns about labour shortages and pressures to increase wages.

The full publication is available here.

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