A regular survey carried out by the Central Bank of Malta amongst firms in the country shows that business sentiment in the fourth quarter of 2023 remained very strong.
52% of firms stated that their activity had increased over the previous three months. The proportion of firms stating that their activity had decreased was also much smaller than that observed in the same quarter in 2022.
Thus, while in the fourth quarter of 2022 there had been a majority of less than 30% of firms who had seen an improvement in activity, in 2023 this majority had risen to 35%. The main source of the improvement appears to have been the services sector, in particular the accommodation, hospitality, travel and transport, and catering and entertainment activities. This reflected the very strong year that the tourism sector had. The Malta International Airport, in fact, reported that 2023 was its best year ever, exceeding the pandemic year by nearly 7%, as 7.8 million passengers used their services.
Expectations for the first quarter of 2024 were also very strong. In fact, 50% of the interviewed firms told the Central Bank that they anticipated that their activity would improve further. The proportion of those expecting a worsening was 8%. Thus, whereas in the survey that had been conducted in the fourth quarter of 2022 the majority of optimist versus pessimist firms had been of just 30%, this time round it rose to over 40%. The services sector was the main source of this renewed optimism. In fact, tourism is expected to have another record year in 2024 according to the Malta International Airport, with passenger movements expected to exceed 8 million.
The majority of firms interviewed by the Central Bank of Malta, 42%, stated that they will continue to expand their investments. This was similar to the proportion of firms that said that they will recruit more workers. Most of this growth is expected in services and manufacturing.
Another interesting finding of the survey was that the absolute majority of firms, 60%, said that they had increased wages last year by more than 5%. The expectation was that this strong pace of wage growth would continue in 2024. In fact, 65% of contacted firms expect their wages to increase by more than 5% this year. This shows that the disposable income of families is likely to rise even faster in 2024. By contrast the proportion of firms reporting an increase in their selling prices dipped below what it had been a year earlier, suggesting that inflationary pressures may be declining.
Photo: Anna Holodna