Last Thursday, the National Statistics Office informed us that in February, retail price inflation stood at 2.3%. This was not just the lowest rate observed since September 2021 but it was also lower than the average rate of 2.6% that had characterised the Nationalist administration between March 2008 and February 2013.

Just a month before, in January, retail price inflation was 3.2%, or more than a third higher. The decline observed between January and February was larger than that in the previous five months taken together. It was only marginally smaller than the decline which had been observed when electricity tariffs had been reduced by 25% in March 2014.

So, what abruptly happened to inflation? In February, food prices fell by 1.2% compared to what they were in January. This was the largest month-on-month drop experienced in food prices in more than seven years. Food prices had been rising every month since February 2021.

The Stabbiltà initiative, which the leader of the opposition had first spoken against and then dismissed as unimportant, stopped a trend of rising food prices.

For the last months, our food inflation rate had diverged from that in other countries, including similar island states affected by the same change in transport costs faced by our importers.

This divergence was keeping our retail price inflation rate higher than it should be, and in the government’s view this was not just hurting our families but was also damaging our economy. A higher inflation rate makes us less competitive, first of all in the tourism sector, but also subsequently in other industries.

The government has invested many hundreds of millions of euros to keep our fuel and energy bills stable. This investment had kept our inflation rate low by international standards, boosting domestic demand and leading to more competitive exports.

Rising food prices were threatening to make all that investment futile. This is why we had to intervene. Market forces on their own were not leading to optimal results, either for families or for our economy.

The decline in food prices in February meant that food inflation now contributes 1.2% of our overall inflation rate. Back in January its contribution had stood at 2.0%. Which means that the development of food prices in February reduced our inflation rate by 0.8%.

Effectively, we are talking about nearly the whole decline in inflation. The contribution of food prices to overall inflation in February was the lowest on record since December 2021, when it stood at 1.1%. So essentially, in a month we reset this to what it had been 26 months earlier.

This scheme has resulted in more competition and led to other prices dropping

But the impact of Stabbiltà should not be reduced to this single month drop in inflation. Its importance lies in the fact that it has hopefully broken a trend.

Before February, our food prices were soaring, when those in other countries were falling. Now we appear to be back on track. In fact, our inflation rate has already nearly converged to that in the rest of the European Union.  Furthermore, the commitment made as part of Stabbiltà was that once prices were reduced, they would stay constant. This means that up to budget day, the price of 450 essential items will remain stable, and will not contribute anything to changes in inflation.

Before February these items were raising our inflation rate. Now they will be a source of price stability. Moreover, this scheme has resulted in more competition and led to other prices dropping.

Does this mean that all is done and dusted, and inflation is no longer an issue? Of course not. Food prices are still 5.5% higher than what they were a year earlier. In January they had been 9.1% higher. So Stabbiltà has improved the situation, but families are still facing higher food prices than they were a year ago.

This is why as a government we need to continue helping families. In May, half of all families in the country, the ones with incomes below average, will be receiving the second additional COLA payment.

Pensioners are benefitting from the largest increase in their benefit ever granted, and so are parents, who are receiving the highest increase ever given in children’s allowance.

We remain committed to aiding farmers against shocks in international prices. We will continue to assist fishermen against rising fuel costs.

Our commitment to make locally produced food the best option for our families is as strong as ever.

While the opposition continues to harp against our policy to keep energy and fuel prices stable, we remain committed to it. This is not the time for the government to fuel inflation.

We will not repeat the mistake made by the Nationalist administration to make the government a source of inflation. Our government will remain a source of stability.

Silvio Schembri