Malta’s Inflation Surge: What’s Behind the 2.5% Rise?

Feeling the Pinch: Malta’s Inflation Rises to 2.5% in April

Standing in line at the bakery in Msida, Maria, a 65-year-old retiree, sighs as she hands over €3.50 for a loaf of bread. Last year, it was €3. Just like that, her pension isn’t stretching as far as it used to. She’s not alone. The National Statistics Office (NSO) has just announced that inflation in Malta rose to 2.5% in April, the highest it’s been in over four years.

What’s Driving Inflation?

So, what’s behind this increase? The NSO points to a rise in prices for food and non-alcoholic beverages, which contributed 0.87 percentage points to the overall inflation rate. Maria’s bread isn’t the only item feeling the pinch. A trip to the grocery store reveals that prices have crept up across the board. A litre of milk that was €0.85 last year is now €0.95. A pack of pasta that was €1.20 is now €1.35. It’s not just food. Fuel prices have also increased, with a litre of petrol now costing around €1.60, up from €1.45 last year.

Economists attribute this to a combination of factors. The war in Ukraine has disrupted global food and energy supplies, driving up prices worldwide. Here in Malta, the cost of importing goods has also increased due to higher freight costs. Locally, the construction sector’s boom has led to increased demand for materials, pushing up prices.

Who’s Feeling the Heat?

While everyone is feeling the squeeze, it’s the lower-income households who are hit the hardest. They spend a larger share of their income on necessities like food and energy, leaving less wiggle room when prices rise. According to the Malta Council for Economic and Social Development, the poorest 20% of households spend around 30% of their income on food, compared to just 10% for the wealthiest 20%.

Small businesses are also feeling the heat. Take Tony, who runs a small café in Paceville. He’s seen his costs rise by around 10% in the past year. “I’ve had to increase my prices slightly,” he says, “but I don’t want to put people off. It’s a tough balance.”

What’s Being Done?

The government has announced a series of measures to help mitigate the impact of inflation. These include a €200 cost-of-living bonus for low and middle-income earners, as well as subsidies for fuel and certain food items. The Central Bank of Malta has also increased interest rates to help control inflation.

But are these measures enough? Some economists argue that more needs to be done to address the root causes of inflation, such as increasing local production to reduce dependence on imports. Others suggest that targeted assistance for vulnerable households is key.

As Maria walks home with her bread, she hopes that the government will do more to help pensioners like her. “It’s not just about the money,” she says. “It’s about dignity. We’ve worked hard all our lives. We deserve to live with dignity in our retirement.”