The COVID-19 pandemic has had an extraordinary impact on the Maltese economy, and companies have felt the effects. Many sectors were negatively impacted, while for some companies the impact was far less damaging to their financials and for others it had a positive financial impact.

The EY Attractiveness survey is set to be revealed next Tuesday. It is a much-anticipated yearly release for the business community and economists alike, as it provides a clear snapshot of Malta’s economic situation, and how companies are faring. The survey was conducted among 116 Foreign Direct Investment (FDI) companies. A number of the survey’s results were already announced over the summer.

This year saw a global pandemic, COVID-19, disrupt economies worldwide, as governments had to take measures to restrict the spread of the virus, while people began fearing public gatherings as were struck with uncertainty.

EY found that almost two-thirds of FDI companies (57%) have been negatively impacted financially by the pandemic, while 21% told EY that the pandemic has had a positive financial impact on their operations. 22% said there was no change.

The sectors worst hit include hospitality (100% negative impacted) and manufacturing (79% negative impacted), EY said. Insurance (57% positively impacted) and other financial services (33% positively impacted) are the sectors that saw the most respondents say that they were positively impacted financially by the pandemic, while iGaming companies have the highest combined positive and no change replies (73%).

The tourism industry has been negatively impacted worldwide. For a few months, Malta’s airport was kept closed, only allowing in repatriation and cargo flights. But even once the airport reopened, many people remained concerned about travelling due to a number of factors, including the COVID-19 fears but also due to the various travelling restrictions in different countries which change frequently. Thus it comes as no surprise that all hospitality companies say they were negatively impacted.

Another question was put to FDI companies, asking when they estimate they will return to 2019 levels.

56% of companies estimate they will return to 2019 levels in one year or less, EY explained. 20% believe it will take more than one year, 14% believe it will take more than two years, 6% more than three years and 5% don’t know. “Sector responses vary, but hospitality respondents are the least confident sector and believe it will take longer to recover and return to pre-COVID-19 levels.”

In terms of companies’ 2020 investment plans, “almost half of the FDI companies have delayed, decreased or cut back their planned investments (46%). A complete cutback was only registered by 7% of respondents. A substantial decrease in investment plans can also be seen in banking, while minor decreases were registered for all sectors. The largest delays are within the ICT and telecommunications, and banking sectors,” EY had said.

Meanwhile, 49% said there was no change in their investment plans and 4% said that they have increased their investment plans.

Interestingly however, investors indicated to EY that even before the pandemic, expansion appetite was already decreasing, with 53% planning some form of expansion, a 5% decrease compared with 2019 plans and a 12% decrease since the 2018 result. “Hospitality (88%), other financial services (58%) and ICT and telecommunications (56%) respondents were the sectors most prepared to expand their operations, EY said. Insurance (71%) and banking (56%) respondents were the most unlikely to do so.”

Looking at the sectors that initially were most prepared to expand, 57% from hospitality still expect to see their plans through and 57% from other financial services plan to carry them out, EY explained. Although banking and insurance were the sectors with the least intention to expand, all this sector’s respondents that did have plans will follow through despite the pandemic, EY said. “21% of ICT and telecommunications companies and 16% of manufacturing companies with expansion plans have now put them on hold.”

The pandemic brought with it changes in the way companies operate. Three-quarters of companies (77%) implemented remote-working for their staff due to the COVID-19 pandemic, EY added.

“Different companies may find themselves in a better position to make the shift than others due to the sector they operate in. However, this operational change has positive implications, including the need to travel less, which reduces traffic, decreases infrastructural demands and benefits to the environment. As a result of the pandemic, several companies have also increased their marketing efforts (22%) and customized new products (17%). 4% indicated relocation outside of Malta and 3% have moved additional functions to Malta.”

The EY survey, when released, will include information as to what companies find attractive in Malta and what they do not. In the 2019 edition, the top criteria rated that make Malta attractive for their interests were corporate taxation (86%), stability of social climate (75%), the telecommunications infrastructure (72%) and potential productivity increase for companies (63%). The stability and transparency of the political, legal and regulatory environment ranked around mid-table in 2019 (46% finding it attractive). EY said in 2019 that this low percentage in the stability and transparency of the political, legal and regulatory environment was in line with recent years, but mentioned that in 2015, this parameter was second on the attractiveness scoreboard with 85%. The lowest three criteria in 2019 were Transport and Logistics Infrastructure (19%), R&D and Innovation Environment (36%), and the Domestic or Regional Market (37%).

The full results of the survey will be announced on Tuesday at 10am during EY’s virtual Future Realised conference, which takes place over four days. The event examines the crisis now and beyond, and features over 50 speakers with insights from the World Bank, World Economic Forum, Financial Times, Microsoft and many more. To book your free place visit www.ey.com/mt/futurerealised