The Malta Independent 12 May 2021, Wednesday

Half of Maltese firms scaled down on investments due to pandemic, EIB survey finds

Bettina Borg Monday, 3 May 2021, 17:27 Last update: about 8 days ago

Half of Maltese firms have scaled down on investments in 2020 due to the Covid-19 pandemic, the 2020 European Investment Bank Investment Survey (EIBIS) has found.

The study, titled ‘EIB Group survey on investment and investment finance 2020. Country overview: Malta’ was shared by Annamaria Tueske, an economist at the EIB, during a Central Bank of Malta webinar.


It considered how Maltese firms have been affected by the pandemic, as well as how firms have been transitioning to digitalisation and firms’ investment in climate change mitigation.

According to the study, 50.2% of Maltese firms reduced their investments due to the pandemic. This figure is higher than the reduction of investments of European firms, which is 45%.

The NET balance of firms also significantly dropped in 2020 in comparison to previous years, with the overall economic climate dropping by over 0.4% and availability to internal finance dropping by almost 0.4%.

Despite reductions in investment, the obstacles to investment have overall diminished. Most notably, access to digital infrastructure does not pose as an obstacle for many firms.

On the other hand, general uncertainty about the future and availability of finance have posed as the most significant challenges for Maltese firms.

The most frequently cited long-term impact of Covid-19 in Malta is the increased use of digital technologies, the study noted, with a rise in 46% of firms turning to digitalisation. This is particularly the case in construction and infrastructure sectors, with 58% of these sectors increasing digitalisation.

Around six in ten firms (58%) have implemented either fully or partially at least one digital technology. While this is above the amount of digitalization noted in the EIB Investment Survey in 2019 (51%), it remains below the EU average of 63%.

Despite an increase in digital technologies, more Maltese firms are non-digital than in the EU, however more Maltese firms are adopting multiple digital technologies to their businesses.

Almost a quarter of firms (22%) expect to see a permanent reduction in employment levels, with service firms expecting to see a 27% drop in employees.

The highest share of investment funding in Malta lies with internal funds (64%) which is in line with the EU average of 62%.


Climate change

44% of Maltese firms feel that their business has been impacted, either on a macro or a micro level, by climate change. This figure is below the EU average of 58%.

Additionally, only 9% of Maltese firms feel that climate change has had a major impact on their business, when compared to 23% of EU businesses.

The transition to a low-carbon future is expected by Maltese firms to have a positive impact on their reputation (+22%), market demand (+11%) and their supply chain (+6%) over the next five years.

60% of Maltese firms have already invested or plan to invest in the measures to tackle the reduction of carbon emissions over the course of the next three years. This statistic is below the EU average of 67%.

Micro and small firms, on the other hand, are less likely to have invested or plan to invest in measures to reduce carbon emissions (51%) than medium and large firms (67%).

Uncertainty about new technologies to tackle the impact of carbon emissions are cited more often as a barrier by medium and large firms (68%) rather than by micro and small firms (44%).

Also addressing the webinar, Finance Minister Clyde Caruana outlined the “unprecedented impact” that the pandemic has had on the economy, with Malta’s Gross Domestic Product (GDP) contracted by 7% and the tourist economy facing an 80% drop in income from 2019 to 2020.

Despite these impacts, other sectors including remote gaming, pharmaceuticals and electronics have proved to be resilient during the pandemic and registered economic growth, Caruana said.

The government has played a key role in supporting businesses throughout the pandemic, Caruana noted, with incentives like the wage support scheme and the deferral of taxes keeping business afloat during challenging times.

With more and more people receiving their vaccination in Malta, and 80-85% of the population expected to receive both doses of the vaccine by the end of August, Caruana hopes that the economy can start to recover from this summer.



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