The cost of living disproportionately impacted poorer communities because the price of the items they tend to consume increased more, according to a new analysis published by Big Four firm KPMG.
The report finds that while the explosion in the country’s inflation in recent years had a universally negative effect, some slices of Maltese society were worse off than others, with poorer households bearing the brunt of price increases.
Using National Statistics Office data, the authors built separate baskets of goods typically consumed by people at different income levels, comparing each basket to understand how their prices were impacted by inflation.
The analysis found that the rise in the price of the basket for the lowest income group was consistently higher than that of the basket belonging to the highest earners.
“From 2019 to mid-2024, low-income households have been affected by rising prices more than high-income ones,” the report says.
The only exception is in the period between March and December 2021, when inflation began to rise well past the 2% mark.
Describing this phenomenon as “inflation inequality”, KPMG say that, at its peak in October 2022, lower-income groups experienced inflation rates that were almost one percentage point higher than their wealthier counterparts. That means the price of items consumed by low earners was rising more rapidly than those of goods typically consumed by Malta’s top earners.
Specifically, the report points to how food and non-alcoholic beverages make up “a greater share of low-income households’ consumption than of high-income ones”.
Malta’s inflation rates have dropped significantly in recent months, with KPMG noting that the annual inflation rate of 2.2% during the third quarter of 2024 was far below the 4.9% registered during the same period last year.
The rising cost of living has frequently been cited as among the country’s most pressing issues, with a Times of Malta poll last year finding that one in three name rising costs as their biggest personal worry.
The government tried to cushion the impact of inflation through a series of initiatives, most notably the Stabbiltà scheme, an initiative that slashed the price of some 450 food items by 15%.
A Central Bank report published over the summer found that food inflation had dropped by some 2% following the scheme’s introduction, although it remains unclear how much of this drop can be attributed to the scheme itself.
A series of additional COLA payments to low-income families were introduced in 2022 and were later expanded to also include medium-income households.
The most recent payments are set to be sent out to some 97,000 households over the upcoming weekend, just in time for Christmas, the government announced on Wednesday.