Nearly half Malta’s businesses have reacted to rising inflation by driving up their own prices, a survey by employers has found.
Carried out by the Malta Employers Association, the survey found that 45% of businesses have reacted to rising costs by passing them on to their customers.
Around 55% said they absorbed the cost themselves.
Conducted among some 400 businesses and representatives of the local economy, the survey found that nearly nine in 10 businesses (8%) said that rising costs due to inflation have impacted them.
In fact, some 64% of businesses are anticipating a drop in demand for their goods and services because of inflation.
This is mostly felt in the retail and wholesale sector (77%) and the hospitality and tourism sector (76%).
Inflation may also impact employees, although most businesses say their workers are safe.
Some 64% of businesses said they will retain the same level of employees for the next year, and around 28% say they will employ more.
Just 8% of businesses say they may employ fewer workers because of inflation.
Overall, businesses are pessimistic about the future
Overall, however, businesses are not optimistic about the future.
Some 45% said they have a negative outlook, and another 45% gave a neutral ‘stable’. Just nine per cent of those interviewed say they are positive about the year to come.
The survey also looked at how businesses feel about the cost-of-living adjustment mechanism: 55% say they will be negatively impacted by the forecast COLA increase for next year, which is likely to approach €10 per week by the post-summer budget, up from just €1.75 last year.
Some 38% saw the increase as a medium burden.
The survey found that around 50% will partially pass the increased costs of operation to their customers. Some 22% will fully pass on the cost to customers.
75% in manufacturing sector say COLA will highly impact their business
A further 28% say they will absorb the cost themselves.
Businesses geared purely towards the domestic market are more likely to pass on the full cost to their consumers.
The survey found that some 75% of businesses in the manufacturing sector say the proposed increase to the COLA mechanism will have a ‘high’ impact on their business.
This, they say, will result in significant increase in costs of production and could affect their company’s competitiveness.
The MEA found that, after manufacturing, hospitality and tourism would be the hardest hit, with 62% saying it would have a high bearing.
Next came ‘professional services’ followed by the wholesale/retail section at 49% and 48% respectively.
Just over half of businesses that are focused on the export market, 53%, say they will be negatively impacted. Whereas 49% of businesses that do a bit of both are also expecting to be hit.