The Minister of Finance is not a person who minced his words … He is a direct speaker with a frills-free attitude, an atypical politician who speaks his mind.
A few days ago, the Hon. Clyde Caruana addressed Parliament on the current destabilizing economic scenario we are currently dealing with … In an unusually sincere speech, he warned that our standard of living is at risk and that Malta needs to prepare for a possibly long period of exceptional inflation. He pinned this to three main factors; the Russian-Ukrainian War, the pandemic, and the monetary policy of quantitative easing that indirectly stimulates demand for goods and services.
“The days, weeks, months, and possibly years to come will go down in history, and historians will mark this time as one of massive change in the lifestyle of the Europeans ”. He stressed that if we are not prepared, and if the worker is not protected, many people will struggle …
No beating around the bush by the technocratically turned politician, no words thrown in the wind but a strong warning about the potential challenges ahead.
In fact, prices in Malta have already “exploded”; there is no other way to describe it! On the one hand, it is an unfortunate situation dictated by the complicated dynamics of the current international scenario. The war between Russia and Ukraine is disrupting the supply side of many raw materials and commodities while the Covid pandemic remains a factor of economic uncertainty and a potential destabilizing factor. On the other hand, the sharp rise in “cheap” foreign employment experienced in Malta has kept wage increases at a lower rate than inflation, possibly exacerbating the situation.
Another issue that many people are questioning and that should be investigated is the abnormal price increases of certain commodities that do not seem to be very related to the current international scenario. Indeed there is a permanent sense that somewhere in the supply chain, there may be some entities that may have taken advantage of the situation.
In the current macroeconomic dynamics, three factors are becoming more evident: people at the bottom of the wage structure will suffer the most; the national minimum wage is inadequate, and our standard of living may become unsustainable in the near future. Unfortunately, if prices continue to rise uncontrollably, the strength of our purchasing power will be further eroded and business activity will be severely affected, resulting in job losses and possibly starting a period. of recession.
To alleviate this potential economic crisis, it is imperative that Malta adapt a proactive approach and be well prepared for the forthcoming “turmoil”. Certain economic policies that have worked so far, may have to change drastically … The current immigration policy, which is highly unrestricted, may have to be tightened at the first sign of a slowdown in the economy, while the property development market must be curbed to avoid any potential property bubbles; those that tend to follow a long boom period, such as the one experienced locally in the last decade.
Rough patches could be on the horizon for Malta. Perhaps it is time for our policy makers and the general public to step back and adapt a more balanced and prudent approach.