Consumers can expect prices of food and other essential goods to keep climbing until after the summer, one of Malta’s leading economists has forecast.
Gordon Cordina told Times of Malta that the rate of inflation in the cost of basic goods was expected to continue to be above normal until at least the end of the third quarter.
“The interpretation is what it is – it is not looking good, whichever way you approach it,” he said.
Cordina, who is also Bank of Valletta chairman, was weighing in on new figures released by the National Statistics Office (NSO) on Monday.
The data shows food prices have been particularly affected, rising at their fastest rate in at least four years.
The Retail Price Index shows an increase of 5.24% in food prices in December compared to a year earlier, reflecting consumer complaints of rising living costs.
It is the highest annual increase since at least 2017 as, prior to that, data was collected differently.
The figure excludes restaurant and takeaway services, which would put the inflation rate of food at 4.94 per cent.
The NSO’s Retail Price Index is a measure of monthly price changes in the cost of purchasing a representative basket of consumer goods and services.
The food category represents a fifth of that basket of goods, the largest single portion.
The rising food prices helped push up the overall annual rate of inflation, which last December stood at 2.59 per cent, up from 2.38 per cent the month before. This is above the ideal guidelines set by the European Central Bank.
COVID-19, Brexit and drastically increased transport and freighting costs have been blamed by importers as being behind a perfect storm of price increases on the island.
Spillover into other categories
Cordina said the spike in food prices would likely spill over into other categories.
“As the increase in food prices is reflecting global conditions, it is likely that we will experience increased inflation across the board in coming months,” he said.
Shoppers first started complaining about rising prices in summer 2021, with supermarket owners conceding that prices have shot up.
At the time, importers and sellers had been reluctant to quantify the price hikes but Times of Malta reported that a conservative estimate would be 15% on the average bag of groceries.
Cordina said that, as a small, isolated country, Malta is particularly susceptible to shocks in the global market.
Suffering from small scale and being on the periphery of the European economy, Malta is more affected by adverse global shocks than larger countries.
Aside from food, increases have also been registered in sports-related equipment (6.82%), carpets and household textiles (6.79%), house maintenance services (5.45%) and veterinary services, including pet food (9.18%).
On the other hand, it appears Malta’s strategy of long-term fixed fuel purchase agreements is leading to stable prices in the energy sector with no change in utility prices.
Social partners to discuss situation
Meanwhile, speaking to reporters on Monday, Finance Minister Clyde Caruana said that later this week he would be briefing social partners on a proposed strategy to tackle the impact of inflation on low-income earners.
The minister has in the past hinted at the need for a new system, aside from the cost-of-living adjustment (COLA), that would specifically target lower income earners who are more susceptible to price fluctuations.
He said a team of advisers from the finance ministry had been working on the proposal for several months.
In the past, Caruana has conceded that reaching an agreement between the government, employers and trade unions on a revision to the COLA system would be difficult.
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