A business sentiment survey conducted by Deloitte Malta has shown that the global economic crisis is negatively impacting the financial and operational performance of most business sectors in Malta and is contributing to relatively weak sentiment for the future.
Forty seven per cent of the participants indicated that their business is contracting, of which 12 per cent confirmed that their business is actually contracting significantly. However, 33 per cent of participants reported that their business performance was stable while 13 per cent of businesses indicated that they are expanding.
Raphael Aloisio, lead partner, financial advisory services, of Deloitte Malta said: "The global reach of the international financial crisis has unavoidably also hit our shores and the scars of this global economic tsunami are also becoming increasingly visible in Malta."
A total of 286 participants took part in the survey which was conducted between March 2 and 20. Respondents consisted of owners, managing directors and financial controllers of a broad spectrum of business organisations. Taken together, the respondents account for approximately €1.4 billion of turnover and 21,000 employees.
Manufacturing, tourism, real estate and health and the elderly are the sectors which are being hardest hit and are experiencing the strongest contracting pressures. The financial services, transport, gaming and construction sectors reported the lowest degree of contraction. To varying degrees, most respondents, across all sectors, indicated that their businesses are being impacted by the downturn in the global economy and various local issues and challenges.
Rising costs, including increases in electricity tariffs, and declining demand from overseas have been cited as the factors which are having the most significant negative impact on business performance.
Over 50 per cent of respondents in the manufacturing, real estate and tourism sectors indicated that their business has been "significantly impacted" by decreasing demand from overseas. Low confidence, increasing caution and less disposable income are causing the greatest concern for the import and distribution, retail, leisure, entertainment, real estate and construction sectors.
Contrary to the international experience, difficulties associated with borrowing money were only cited as the major issue impacting performance in the real estate and construction sectors.
Forty-six per cent of the respondents believe that prospects for their business over the next 18 months are for things to get worse. Of these, 10 per cent believe that their prospects are much worse.
General perceptions continue to be worse than actual experience, with 78 per cent of respondents being of the opinion that the prospects for the Maltese economy as a whole are for things to get worse.
"Malta may be experiencing a time lag, and was relatively late in being affected but may take longer to turn around," the Deloitte survey points out.
The financial services, gaming and transport sectors are generally more optimistic, with over 60 per cent expecting prospects to either remain stable or grow.
The tourism, real estate, construction, manufacturing and health and elderly sectors remain the most challenging, with over 60 per cent of respondents anticipating deteriorating prospects over the next 18 months.
Nearly 40 per cent of respondents in the real estate and construction sectors were of the opinion that their sector will take over 18 months to recover. A third of respondents in the tourism sector believe that recovery is over 18 months away.
A general consensus exists among the majority of respondents that the impact of the downturn will not be short-lived, with only 16 per cent believing that the impact will last for six months or less.
Seventy per cent of respondents expect the negative impact to last between seven and 18 months. A further 20 per cent believe that the impact will last even more than 18 months.
In reaction to the current business climate 26 per cent of respondents have embarked on a cost cutting exercise and 10 per cent intend to reduce the size of their workforces.
Cost cutting measures have been most widely reported in the retail, manufacturing, import and distribution, tourism and construction sectors while a reduction in workforce is most evident in the construction, manufacturing and tourism sectors.
The tourism sector is increasing its marketing initiatives to counter the negative pressures, with 24 per cent of respondents indicating that they have stepped up their marketing and advertising initiatives.
Only three per cent of respondents believe the government should not intervene to stimulate the local economy during this period of crisis and allow market forces to play their full role. Thirty-nine per cent of respondents believe that the government should respond in exceptional cases only, using specific measures - such as it is doing in manufacturing - while 58 per cent of respondents believe the government should be intervening generally - as it is doing in tourism.
Increased investment and employment incentives together with a revision of the current electricity tariffs are the two measures which are most expected by business leaders.
Businesses also expect the government to be more efficient and effective in its own management and expenditure processes, to reduce unnecessary red tape and government-induced costs and to be more expeditious in accelerating investment in infrastructural projects and processing Mepa applications for major projects.
The respondents who took part in the Deloitte survey came from the tourism, manufacturing, retail, import and distribution, financial services, services, IT, media, communications, real estate, construction, leisure, entertainment, transport, health, the elderly and gaming sectors.
Forty seven per cent of the participants indicated that their business is contracting, of which 12 per cent confirmed that their business is actually contracting significantly. However, 33 per cent of participants reported that their business performance was stable while 13 per cent of businesses indicated that they are expanding.
Raphael Aloisio, lead partner, financial advisory services, of Deloitte Malta said: "The global reach of the international financial crisis has unavoidably also hit our shores and the scars of this global economic tsunami are also becoming increasingly visible in Malta."
A total of 286 participants took part in the survey which was conducted between March 2 and 20. Respondents consisted of owners, managing directors and financial controllers of a broad spectrum of business organisations. Taken together, the respondents account for approximately €1.4 billion of turnover and 21,000 employees.
Manufacturing, tourism, real estate and health and the elderly are the sectors which are being hardest hit and are experiencing the strongest contracting pressures. The financial services, transport, gaming and construction sectors reported the lowest degree of contraction. To varying degrees, most respondents, across all sectors, indicated that their businesses are being impacted by the downturn in the global economy and various local issues and challenges.
Rising costs, including increases in electricity tariffs, and declining demand from overseas have been cited as the factors which are having the most significant negative impact on business performance.
Over 50 per cent of respondents in the manufacturing, real estate and tourism sectors indicated that their business has been "significantly impacted" by decreasing demand from overseas. Low confidence, increasing caution and less disposable income are causing the greatest concern for the import and distribution, retail, leisure, entertainment, real estate and construction sectors.
Contrary to the international experience, difficulties associated with borrowing money were only cited as the major issue impacting performance in the real estate and construction sectors.
Forty-six per cent of the respondents believe that prospects for their business over the next 18 months are for things to get worse. Of these, 10 per cent believe that their prospects are much worse.
General perceptions continue to be worse than actual experience, with 78 per cent of respondents being of the opinion that the prospects for the Maltese economy as a whole are for things to get worse.
"Malta may be experiencing a time lag, and was relatively late in being affected but may take longer to turn around," the Deloitte survey points out.
The financial services, gaming and transport sectors are generally more optimistic, with over 60 per cent expecting prospects to either remain stable or grow.
The tourism, real estate, construction, manufacturing and health and elderly sectors remain the most challenging, with over 60 per cent of respondents anticipating deteriorating prospects over the next 18 months.
Nearly 40 per cent of respondents in the real estate and construction sectors were of the opinion that their sector will take over 18 months to recover. A third of respondents in the tourism sector believe that recovery is over 18 months away.
A general consensus exists among the majority of respondents that the impact of the downturn will not be short-lived, with only 16 per cent believing that the impact will last for six months or less.
Seventy per cent of respondents expect the negative impact to last between seven and 18 months. A further 20 per cent believe that the impact will last even more than 18 months.
In reaction to the current business climate 26 per cent of respondents have embarked on a cost cutting exercise and 10 per cent intend to reduce the size of their workforces.
Cost cutting measures have been most widely reported in the retail, manufacturing, import and distribution, tourism and construction sectors while a reduction in workforce is most evident in the construction, manufacturing and tourism sectors.
The tourism sector is increasing its marketing initiatives to counter the negative pressures, with 24 per cent of respondents indicating that they have stepped up their marketing and advertising initiatives.
Only three per cent of respondents believe the government should not intervene to stimulate the local economy during this period of crisis and allow market forces to play their full role. Thirty-nine per cent of respondents believe that the government should respond in exceptional cases only, using specific measures - such as it is doing in manufacturing - while 58 per cent of respondents believe the government should be intervening generally - as it is doing in tourism.
Increased investment and employment incentives together with a revision of the current electricity tariffs are the two measures which are most expected by business leaders.
Businesses also expect the government to be more efficient and effective in its own management and expenditure processes, to reduce unnecessary red tape and government-induced costs and to be more expeditious in accelerating investment in infrastructural projects and processing Mepa applications for major projects.
The respondents who took part in the Deloitte survey came from the tourism, manufacturing, retail, import and distribution, financial services, services, IT, media, communications, real estate, construction, leisure, entertainment, transport, health, the elderly and gaming sectors.