Issue link: https://maltatoday.uberflip.com/i/1513813
13 maltatoday | SUNDAY • 31 DECEMBER 2023 Looking forward 2024 KARL AZZOPARDI kazzopardi@mediatoday.com.mt NICOLE MEILAK nmeilak@mediatoday.com.mt Inflation will continue to be a headache for consumers and exporters in 2024 IT'S a weird time for the econ- omy. The government is paying energy providers to, in effect, cap fuel and electricity prices. Im- porters of cereal, flour and ani- mal feed are also being helped by government subsidies. Government is forking out €350 million, but even this hasn't been enough to fully alleviate the pres- sure faced by households strug- gling to maintain their standard of living. Let's look at the numbers. In November 2023, the annual rate of inflation as measured by the retail price index was 3.6%, only marginally down from 3.7% the month prior. Food and housing are the main drivers of inflation, registering a whopping 7.5% and 5.7% inflation rate respec- tively. And if we look at the forecasts for the years ahead, prices will still increase. The Central Bank's forecast suggests food inflation will "moderate gradually" to 4.3% next year. Services inflation, driv- en by restaurants and housing services, should also ease from 5.2% in 2023 to 3.1% in 2024. Meanwhile, imported inflation should moderate as national sup- ply-chain disruptions abate. Gordon Cordina, an economist, warned that inflation in Malta could drop at a slower pace com- pared to other countries. But this is very much in line with the fact that inflation tends to rise and fall at slower rates, which is also a sign of stability. "A relatively high inflation rate in Malta as compared to other countries would also reflect the stronger rate of economic growth, and the inevitable smallness and periph- erality of our economy," he said. "Stability is key to a small and open economy like Malta, and our ability to cushion external shocks is essential," Cordina said. "Government intervention, where needed should thus con- tinue to focus on sustainable eco- nomic growth and on promoting social cohesion." JP Fabri, an economic con- sultant, agreed that inflation is expected to remain elevated and above 2% until late 2025, reflecting tight labour markets and sustained demand pressure. "There is also the risk that the cost-of-living adjustment will be further shifted to the consumer," he warned. The Maltese economy doesn't function in a vacuum. It's part of a global economy, and is suscep- tible to external risks brought on by geopolitics and tensions in the international political economy. "Risks to the outlook are tilted to the downside," Fabri comment- ed. "Externally, downside risks include spill over effects from a possible escalation of Russia's war in Ukraine or of the Isra- el-Gaza conflict, especially with implications for global commod- ity prices. Here, focus needs to be on improving Malta's produc- tivity performance and competi- tiveness position." As people adjust their spending habits, eyes will be on importers. They have already come under fire for so-called 'cartel' practices from people like MEP Alex Agi- us Saliba, who went to the Euro- pean Commission asking for a probe into local food importers. Sentiment towards importers might sour further once a new EU-wide carbon tax on shipping comes into effect this January. This new tax is an extension of the EU's CO2 emissions trading scheme (ETS) to shipping com- panies, and Malta is expected to be particularly impacted by the move. The freight cost for a trailer coming from central Eu- rope boarding the Genoa-Malta cargo route is currently around €3,500 and this will increase by around 3% as a result of the ETS surcharge. But road toll charges in Germany and other EU coun- tries coming into force over the coming months could contribute an additional 3% increase. Farsons CEO Norman Aquili- na said Malta needs to keep the pressure on the European Com- mission to mitigate the impact of the ETS, as it will have significant implications on local logistical costs and overall competitive- ness. But beyond the ETS expan- sion, Aquilina said connectivity will be an equally important fac- tor in 2024. "Having the ability for businesses to efficiently con- nect, that is, within reasonable shipping transit times, not only in terms of imports, but also ex- ports, remains fundamental," he said. However, Aquilina said there needs more perspective on the bigger economic picture. Devel- opments like the expansion of the ETS scheme have an impli- cation on the economy not just on added inflationary pressure but also on our competitiveness as a country. "We operate from a small island economy and are heavily reliant on our ability to trade both from an import and export point of view. Therefore, shipping connectivity, along with the related logistical costs are al- ways key factors impacting our competitiveness," he said. In 2024, keeping our eyes on inflation as it impacts consumers may not be enough, it seems. MALTA'S triumph in the Games of the Small States of Europe in 2023 saw the country collect a record haul of medals. For the first time in the games' history, Malta topped to the table with a record-breaking 97 medals, including 38 gold medals across all sporting dis- ciplines. The success against Europe's fellow minnow countries is, however, unlikely to be repeat- ed at the Paris Olympics next summer. Malta has competed in 17 summer Olympic Games and three winter Olympic Games and no Maltese competitor has ever won an Olympic medal. Shooter William Chetcuti came the closest, in relative terms. Chetcuti missed the Double Trap Shooting final in 2004, 2008 and 2012 by a relatively slim margin. In 2004 and 2008, Chetcuti was tied for 6th (the required placing to enter the fi- nal) but lost a tie breaker. For nations with a limited talent pool to work with, qual- ifying for the sporting gala is tough, and reaching the podi- um even more of a long shot. Malta's small size is its main weakness but even San Marino, with a population of around 30,000, has achieved the dis- tinction of being the smallest country to win an Olympic medal. Size ought not to be a decisive factor, after all. With athletes spurred on by their successes in the GSSEs, maybe the country is a step closer to hearing the Maltese anthem played on the podium in Paris in 2024. Sporting events in 2024 Olympics • Paris • 26 July – 11 August Paralympics • Paris • 28 Au- gust – 8 September Football • UEFA Euro 2024 • Germany • 14 June – 14 July Football • UEFA Women's Euro 2025 qualifiers • 3 April – 3 December Football • UEFA Champions League new format • Starts summer 2024 Sailing • America's Cup • Bar- cellona, Spain • 22 August – 20 October Can Malta get a medal at the Paris Olympics?