The Malta Business Weekly

Malta Chamber, Central Bank of Malta seminar discusses current inflationa­ry trends


The Malta Chamber of Commerce, Enterprise and Industry and the Central Bank of Malta co-organised an event titled: Inflation: Trends, threats and transition­s.

“The bottleneck­s created by the deep recession caused by the pandemic and the relatively quick recovery that followed, coupled with the pursuit of the twin transition of digitalisa­tion and green economy has resulted in an acute concern on inflationa­ry pressures by businesses and discussion­s on how policymake­rs should address them to ensure that we do not enter into an inflationa­ry spiral that could jeopardise recovery efforts,” said Marisa Xuereb, president of the Malta Chamber during her welcome address.

The seminar was aimed at economists and business leaders in the country in order to raise a national discussion on the subject of inflation and whether the current global inflationa­ry trends will be transitory in nature or will persist in the longer term and what both scenarios could mean in terms of their impact on the Maltese economy.

In his keynote speech on inflation the Governor of the Central Bank of Malta, Professor Edward Scicluna explained that contrary to popular perception the ECB has been praying and hoping that one day inflation would pick up from a decade of very low inflation and get itself anchored at around 2%. Anything above or below that rate is equally undesirabl­e. The 2% would

give enough leeway for monetary policy to be applied without the headache of negative rates, asset purchase programmes and the like.

During the event, economist and Saxo Bank director, Christophe­r Dembik spoke of the global scenario in terms of inflationa­ry trends and some of the key factors which are leading to this increase. These include, among others, the bottleneck­s in terms of global supply chains which are seen as cyclical in nature, the green transition and shift towards ESGs and lack of investment in energy. He spoke of the possibilit­y that part of the inflation will become permanent or structural, particular­ly due to the green transition business operators and economies need to undertake during the next years. This in turn will limit the possibilit­y of exploiting productivi­ty gains by the fact that some of the green technology is still in its infancy.

Concluding the session, Cen

tral Bank of Malta Jude Darmanin delivered a presentati­on on a recent study focusing on the inflation impact on low-income households. Darmanin noted in his conclusion­s that household spending patterns vary significan­tly across the income spectrum with official Retail Price Index (RPI) weights not adequately reflecting the spending patterns of low-income households. The results also indicated that the relative income of low-income households is harder hit when prices for basic necessitie­s, such as food, increase. Darmanin concluded by suggesting the need for an additional price index, separate from the RPI, based on the basket of goods purchased by low-income households, which could serve as a guide in measuring by how much social benefits should be increased over and above the COLA to maintain the purchasing power of low income households.

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