The Central Bank of Malta has today just published its latest Economic Update 12/2025. This update portrays a resilient economy with stable growth, though it highlights specific sectoral challenges and persistent domestic uncertainty that directly impact family businesses. Thus I am forwarding a summarised overview of this economic update, with a special focus on the likely implications for family businesses

Business Sentiment and Economic Uncertainty
Family businesses, which often rely on long-term stability for succession and investment planning, face a mixed environment: Business activity remains close to its long-term average. While general sentiment declined slightly in November, it remains above historical norms. The Economic Policy Uncertainty (EPU) Index declined to 131.2 in November but remains elevated above its historical average. This uncertainty is primarily driven by domestic factors, such as labour-market issues following the closure of entities like Microtek. Conversely, the Economic Uncertainty Indicator (EUI) fell, particularly in the retail and services sectors, making it slightly easier for businesses in these fields to make near-term financial and business predictions.

Sectoral Performance and Consumer Demand
Family businesses in Malta are heavily concentrated in the services, retail, and construction sectors, each showing different trends. Consumer confidence and retail sentiment both improved in November. This was driven by better expectations for the general economic and financial situation over the next 12 months. The sentiment indicator for construction turned significantly positive, rising to 43.4 from -3.6 in October. Businesses in this sector reported above-normal order books and positive employment expectations. In contrast, industrial sentiment fell sharply, driven by poor production expectations. Small family manufacturing firms may face tighter margins and lower demand in the coming months.

Labour Market and Operational Costs
The labour market remains tight, which presents both a challenge (to employ) and an opportunity (strong consumer base). The unemployment rate increased marginally to 3.1%, which is still historically low. This suggests continued difficulty for family businesses in finding and retaining skilled staff. Employment expectations remain positive, particularly in the services and construction sectors. This optimism, combined with low unemployment, suggests that wage costs are likely to remain a significant overhead.

Financial and Fiscal Environment
While the composite rate on outstanding loans decreased marginally to 3.26%, the rate on new loans increased significantly to 3.40%. Family businesses looking to finance new expansions or likely could likely face higher borrowing costs than those with existing debt. Annual inflation (HICP) remained stable at 2.5%. While food inflation rose slightly to 3.1%, services inflation declined. This stability helps family businesses with more predictable pricing strategies. In terms of government finances, the Consolidated Fund reported a deficit of €120.7 million for October, a marked increase from the €45.5 million deficit a year earlier. This widening gap was caused by a 23.8% spike in government expenditure, which outweighed a 12.9% rise in revenue from income tax and VAT. By the end of October, the total stock of outstanding government debt reached €11,185.1 million. While higher government expenditure, leading to an increased deficit, supports domestic demand, it also highlights potential future fiscal adjustments.