Scicluna’s ‘tough decisions’ warning
The governor of the Central Bank of Malta issued a stern warning last week when he launched the bank’s annual report for 2022.
Tough decisions may need to be taken, he said, in order to tackle what he described as the “inflation monster”.
He said that inflation is likely to remain too high for too long, and that this would require some kind of intervention, he warned.
Like most of the world, Malta has seen inflation skyrocketing for more than a year. It started at the beginning of 2022, and quickly multiplied when Russia invaded Ukraine. Since then, there has been no respite as the price of goods and services have continued to rise, and exponentially, one may add.
In his address, Scicluna said that Malta’s rate of inflation is among the lowest in Europe. But it must be pointed out that the inflation that we are experiencing is unprecedented, both in terms of numbers as well as the length of time that this continues to happen.
It must be remembered that the inflation rate in Malta would be much higher, were it not for the government’s decision to subsidise energy and fuel. But the question will always be : for how long can the government do so? Prime Minister Robert Abela said there is no definite end to this subsidy, but what he is not realising is that the country’s deficit and debt continue to rise because of this, and someday it will come back to bite us.
(The government is also trying to play a political game in this, by saying that the Opposition was in favour of removing the subsidy, when this is clearly not the case. But that subject is for another day.)
The effects of inflation have also led to an unprecedented cost of living adjustment rate for 2023,which was announced in the budget presentation last October. A €9.90 weekly increase for each and every worker had started in January 2023, but this has inevitably meant that prices shot up further at the start of the year. It is likely that the COLA for 2024 will once again have to be high. It is possible, not to say probable, that if things remain the same or become even worse, the increase to be announced in October this year will have to be higher than that, unless there will be some kind of revision of the system.
We were told that during the course of this year there would have been discussions on the way forward, with employers suggesting a revision of the system to make it more manageable, while unions insisted that they will not budge from the idea that workers need to be compensated. Weeks and months have passed, and soon decisions will need to be taken in this regard. As should always happen in these circumstances, there should always be a balance between what the employers want and what the workers need, so as to keep up with their lifestyle.
So far, we know that the Malta Council for Economic and Social Development – where such matters are discussed – has not touched the subject. It’s time that the employers and unions start talking about the elephant in the room.