A moderation in input costs appears to be fuelling renewed optimism among Maltese businesses, according to the Central Bank of Malta’s (CBM) latest business dialogue covering the second quarter of 2025.

The net share of companies reporting higher input costs dropped to 63 per cent, down sharply from 81 per cent in the previous quarter. Selling price pressures also eased slightly, with 42 per cent of firms raising prices, compared to 48 per cent earlier in the year. While cost challenges remain elevated by historical standards, the overall trend suggests some relief is reaching businesses.

This easing of cost pressures is being reflected in a more positive outlook for short-term activity. A net 33 per cent of companies expect business activity to improve in the coming months, only slightly down from 35 per cent in the previous quarter. Service providers are the most upbeat, followed by firms in the manufacturing sector. Businesses in construction and real estate remain cautiously optimistic, while those in the wholesale and retail segment anticipate weaker performance, citing stiff competition and ongoing economic uncertainty.

Despite the improved sentiment, actual business conditions across sectors remain mixed. The net share of firms reporting expansion in the second quarter stood at 22 per cent – a slight improvement over the first quarter, but still below the highs recorded in the past three years. The services sector led the way, while manufacturing, construction, and real estate also reported positive conditions. In contrast, the wholesale and retail sector experienced overall negative performance.

Investment appetite, however, softened. The share of companies planning to increase investment fell to 13 per cent, down from 24 per cent in Q1. Capital spending is largely driven by operational needs, efficiency upgrades, and diversification plans.

Employment intentions held steady, with a net 45 per cent of firms expecting to hire, broadly unchanged from 46 per cent in the first quarter. However, challenges around attracting and retaining skilled labour persist across sectors.

The CBM’s publication also features a special section on the potential impact of tariffs, with many companies indicating a “wait and see” approach due to the prevailing uncertainty.

The Central Bank of Malta conducts regular business dialogues to gauge private sector sentiment and support informed policy-making.