17 - 23 May 2001

Manufacturing sector concerned about economic climate

by Ivan Brincat

The manufacturing sector is showing a deterioration in business sentiment and this is mainly reflected in the electronics industry.
While the pace of economic growth decelerated slightly during the fourth quarter of 2000, this was attributed to a slower pace of activity in the electronics industry.
Moreover, export-oriented establishments have expressed concern about their short-term prospects possible due to the prevailing uncertainty about the likely magnitude of the economic slowdown in the United States and its spillover effects on major economies.
Manufacturing firms producing mainly for the domestic market, such as furniture makers, remain concerned about their medium-term prospects also due to the increased competition from imports as levies are reduced.
These trends come out from the latest business perceptions survey issued by the Central Bank for the first quarter of 2001.
The survey, carried out in January and February covers a sample of 139 firms employing 23 per cent of private sector workforce and a combined annual turnover exceeding Lm480m.
Meanwhile, operators in the construction industry and the distributive trades were also less optimistic about the outlook for the Maltese economy.
The Central Bank said the results of the latest business perceptions survey suggest that the short-to-medium-term prospects for export activity may have deteriorated slightly, due to the slowdown in the demand for electronic components internationally.
This explains the deterioration in business sentiment expressed by participants.
However, once international conditions improve, particularly if the United States economy recovers more rapidly from its current slowdown, export turnover could expand substantially in view of the increase in the industry’s capacity generated by investment made in 2000.
The Central Bank has reported that the recovery in domestic demand remained modest.
During the final quarter of 2000, most domestically oriented firms continued to report a below-normal level of activity relative to their capacity, with the only exceptions being those in the services sector.
This sector registered an above-normal level of activity throughout 2000, through its rate of expansion flattened in the last two quarters.
The manufacturing firms continued to report that they operated substantially below capacity during the last quarter of 2000. In particular, firms in the food and beverages, furniture, and paper and printing sub-sectors recorded low levels of turnover.