Businesses are slowly recovering from the Covid-19 pandemic, with the latest proof of this coming in the form of a survey published by The Malta Chamber of SMEs… although other international events are having a negative effect.

While 25% of respondents were less profitable in 2022 than in 2021, 36% said their profitability remained the same while 39% said they were more profitable. Given the increase costs internationally, the fact that profitability remained the same for 36% is not a bad thing.

Indeed, 39% said that overall they fared better than 2019, which was a pre-Covid year. 15% said they were equivalent to 2019. 17% said they were close to 2019 levels, with the rest being further below, so we’re not quite there yet.

In terms of reasons for the increase in sales when compared to 2021, the largest number of respondents (28%) said that the end of Covid restrictions led to their increase. 18% stated that there was more stability and 16% said that there was an increase in consumer confidence. The rest highlighted a number of other reasons. However, by contrast, most respondents (23%) blamed decrease in sales on customer spending power decreases, inflation (13%), and an increase in prices (10%). There were many other reasons given as well.

It is clear that the decrease in spending power is a concern. The international situation has had an impact on prices of goods locally. High energy prices abroad for example mean factories abroad have higher costs for production. The cost of primary materials had also gone up.

But if prices keep going up then that is going to impact people’s spending power, which will in turn result in calls for higher wages.

The main causes of price increases in their businesses according to the survey were the cost of goods increasing from abroad (26%), Importation costs (20%) and wage costs (18%).

SMEs are a very important part of Malta’s economy. Having a regular snapshot identifying the challenges they face and what impacts them is beneficial to the country, as it can help policy makers identify what areas to tackle.

One must point out that the Prime Minister recently highlighted that logistic prices have gone down, although the Director General of the Malta Employer’s Association Joe Farrugia said that the trend in international logistics prices may bring inflation down, “but this does not necessarily imply a fall in prices”. Farrugia did say however, that there could be more price stability this year.

A number of challenges were highlighted by the SMEs for 2023. Increasing costs in general was cited as the major challenge for 14% of respondents, and Increasing wage costs is what 12% highlighted. These were the top two challenges mentioned. As previously said, these could be tied to one another.

There are other challenges that were highlighted for the coming year which might be easier to tackle through effective government policies. 9% highlighted the labour shortage for example. 6% highlighted bureaucracy. 4% highlighted traffic.

Another statistic shows that 29% of SMEs’ plans for their businesses is to stay the same in 2023. 21% plan to expand their business, and others highlighted, for instance, offering products online, or diversifying among other things. Thankfully, the percentage who responded that they would close down is very low, at 2%.

Despite the challenges internationally, SMEs don’t believe the situation will cause them to shut down.