The Central Bank’s latest business perceptions survey has registered a considerable improvement in business sentiment.

The survey, carried out in January and February, and reported in the latest issue of the Central Bank’s Quarterly Review published on Friday, showed that while expectations about the general economic situation remained negative, the balance of replies rose from minus 47 percentage points in the last quarter of 2005 to just minus eight.

The respondents anticipating a deterioration dropped from 55 per cent to 23 per cent. Export-oriented manufacturers and operators in the tourism sector switched from a negative to a positive outlook and in the domestically-oriented manufacturing firms only four per cent of respondents anticipated a deterioration in the economic situation. Respondents in the services sector as well swung from a pessimistic to an optimistic outlook.

The Quarterly Review also showed that during the December quarter the Maltese economy expanded by 2.8 per cent in real terms, slower than the 4.1 per cent registered in the third quarter but higher than the minus 2.1 per cent contraction experienced in the last quarter of 2004. Real GDP growth in 2005 was thus established at 2.5 per cent, due to a pickup in private consumption, a rapid expansion in investment and inventory accumulation.

The headline rate of inflation edged up slightly to three per cent in December while the unemployment rate rose to 7.3 per cent from 6.9 per cent a year earlier.

The general government deficit for 2005 narrowed to Lm63.7 million, or 3.3 per cent of GDP from 5.1 per cent in the previous year. But the gross general government debt continued to increase from Lm1,394 million in 2004 to Lm1,439 million.