Issue link: https://maltatoday.uberflip.com/i/1434006
9 EDITORIAL BusinessToday is published every Thursday. The newspaper is a MediaToday publication and is distributed to all leading stationers, business and financial institutions and banks. MANAGING EDITOR: SAVIOUR BALZAN EDITOR: PAUL COCKS BusinessToday, MediaToday, Vjal ir-Rihan, San Gwann SGN9016, Malta Newsroom email: bt@mediatoday.com.mt Advertising: afarrugia@mediatoday.com.mt Telephone: 00356 21 382741 B usinessEuruope's Economic Out- look for Autumn 2021 is a clear warning on mounting price pres- sures – fact of life not just for major Eu- ropean companies but also for Maltese SMEs. The EU economy is undergoing a strong recovery which gives ground for optimism for Europe's businesses after a long period of almost unparalleled hardship. But Europe's exports and production are increasingly suppressed by growing strains and bottlenecks in global supply chains. Energy prices have also surged, factors which push up input prices for compa- nies and cause production to come to a halt due to lack of necessary materials. This threatens to blunt the upturn. There is a clear risk that even short- term price rises could translate into longer-term inflationary pressures. Adding to the wage pressures, bottle- necks have also appeared in the labour market, with the proportion of firms experiencing hiring difficulties back at pre-pandemic levels. Nowhere is this best illustrated in Malta, which is completely at the mer- cy of the global supply chain, and is suffering an exodus of foreign workers which allowed a sustained growth for private businesses that needed a pleth- ora of skills at reasonable prices. Today, many businesses are not functioning at their pre-pandemic levels because of the absence of a large volume of work- ers previously residing in Malta. The silver lining is the State aid that has supported businesses and the con- tinued good fortune of low energy costs in Malta. Yet businesses are facing the pressure of inflationary wages, and this means that moderation is crucial in ensuring that temporary price rises do not lead to a damaging wage-price spi- ral, which would risk damaging com- petitiveness and in turn, cause higher inflation. The strong economic recovery gives cause for optimism, but it remains es- sential that a premature tightening of supportive fiscal policy and related measures is avoided in the short run. Direct payments to vulnerable house- holds, deferred payments, tax cuts, and state aid for companies that are com- patible with the EU state aid rules, re- main crucial. Prolonging existing measures under the State aid Temporary Framework is key for European companies at this stage of the pandemic, and it is impor- tant that Europe does not resume to the normal rules on State aid prematurely before the recovery is self-sustaining. On the other hand, state aid policy should support good aid and invest- ment in research and innovation pro- jects that contribute to the EU's edge on a global stage. European businesses should be supported in their transition towards climate neutrality and sustain- able growth so in principle, eligibility to aid should be granted to all technol- ogies that contribute to climate transi- tion. The current shortages in raw materi- als, the subsequent increased prices of materials and the peaks in transpor- tation costs and obstacles to mobility of personnel, are also a factor affect- ing Maltese businesses, which in turn must increase strategic safety stocks. However, certain areas require public action, such as the elimination of all export restrictions, promoting regu- latory cooperation and the adoption of international standards, as well as carefully designing initiatives in the area of sustainability. Several measures can be useful to alleviate pressure, such as simplifying customs procedures, en- suring better coordination on health and safety measures as well as travel restrictions, and monitoring and ad- dressing the uptake of trade-restrictive measures by governments. Perhaps it is also time that govern- ments promote "buy national" policies, so as to ensure continued support of national industries that seek to fill in the gap of the global supply chain dis- ruption. Rising prices a warning on wages 2.12.2021