Prices will continue to increase in the coming months, the government and employers have warned, but it is too early to forecast by how much.
Questioned about rising prices, Finance Minister Clyde Caruana would not commit himself to how much more consumers will have to fork out in the coming months but said they should expect further inflation.
A perfect economic storm brought on by the pandemic, rising shipping prices and the Russian invasion of Ukraine have seen consumer prices rise steadily in recent months.
Asked if the government had put a mechanism in place to stabilise prices, Caruana said this was “too premature”.
He did, however, say that he expected prices to continue to surge in the coming weeks.
The minister said the government was doing all it could to curb increases and control the cost of prices of wheat, fuel and energy.
Employers worry about drop in income
Joe Farrugia, director-general of the Malta Employers’ Association, said there is no questioning that prices would continue to climb.
He said the costs of basic raw materials are being transferred onto consumers when purchasing the final product.
This trend, Farrugia said, is expected to continue and may even deteriorate further in the coming months or years as a direct result of the war between Russia and Ukraine.
Farrugia added that employees are justifiably concerned about the decrease in their real disposable income.
Likewise, employers are having to take tough decisions over whether to absorb the cost themselves or else pass them on to consumers through higher prices.
If companies opt for the latter, this will fuel inflation even further. Farrugia said this is a matter of great concern, more so should energy rates spike in the coming months.
He said the worst scenario for Malta is stagflation – a mix of inflation and unemployment. This can occur if companies, or the economy in general, lose competitiveness due to a wage-price spiral, he said.
Farrugia insisted that both employers and workers’ representatives need to be responsible in the manner in which they deal with this situation. He said the government should focus its expenditure on the most vulnerable and assist those companies or sectors that are most affected rather than spreading fiscal measures across the board indiscriminately.
He said that, both in Malta and many other economies, governments have little room to manoeuvre as they emerge from the economic ravages of the pandemic.
According to Farrugia, the main priority should be to safeguard the competitiveness of enterprises to avoid job losses.