‘Malta must be strengthened as the next 6 to 12 months will show an increase in inflation’ – Marisa Xuereb
The President of the Malta Chamber of Commerce Marisa Xuereb warned on Monday that inflation is expected to hit Malta consistently for the next six to 12 months as a result of the conflict in Ukraine.
Talk to The Malta Independent, Xuereb highlighted the difficulties that businesses face in adapting to the new reality as well as what can be done to alleviate some of the pressure on various sectors.
Xuereb said that every day the war continues, the effect on businesses will continue to worsen. “Deficiencies have put a lot of pressure on the local market and the import of basic ingredients is characterized by high import and transport costs.”
Due to the lack of these ingredients in the food sector, some governments such as Italy have made it possible to replace some ingredients in ready-made foodstuffs with others. Xuereb gave the example of companies in Italy that are replacing sunflower oil with rapeseed oil in specific foodstuffs.
This change is only possible because the Italian government has given its approval to it. “The change will only require these companies to identify the change in the same way as they print the expiry date of their products. This will not require any change in product labeling. “
Xuereb explained that Malta does not yet allow food importers to import these ready-made food items with substituted ingredients. The Maltese government is still asking food importers to change the labels to show the ingredient that has been replaced.
This still creates undue hardship in the growing amount of problems faced by importers.
During the conflict, the food and manufacturing industries were hardest hit with companies doing everything they could to survive.
“Rising fuel and electricity prices across the EU have steadily increased the cost of raw material production and also transport. Although prices in Malta are subsidized, Maltese businesses still have to import material from abroad. ”
Xuereb confirmed that prices today due to the conflict have increased by 15% to 25% compared to the same period in 2021.
Lack of material means businesses have two options; to look for other higher priced importers or to replace materials or ingredients altogether.
“Substitution of an ingredient in a foodstuff is relatively easy but substitution of a material in the automotive industry, for example, is almost impossible as that material has to go through a series of processes that qualify the material, and it takes time. “
Xuereb pointed out that all businesses in Europe are going through the same thing and so everyone is learning from each other. “At the end of the day, margins remain lower and lower, forcing businesses to revise their prices as loss-making operations are unsustainable.”
With the supply chain constantly disrupted, there are only so many businesses that can do it to absorb costs. “These prices will not fall sharply if the war ends tomorrow but we have to start somewhere in order to find a sense of stability again.”