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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 18.01.2024 E urostat data released on Wednes- day shows that annual inflation in the Euro area in December in- creased to 2.9% from 2.4% in November. Annual inflation for the whole of the EU was 3.4%, up from 3.1% a month earlier. The rates are much lower than in- flation recorded a year earlier but the month-on-month increase suggests that inflation volatility in the EU is still present. The Eurostat figures also show that Malta bucked the trend with annual inflation in December declining to 3.7% from 3.9% the previous month. The annual inflation rate in Malta, ac- cording to the Harmonised Index for Consumer Prices (HICP), has been declining steadily since July. Nonetheless, inflation in Malta re- mains almost a percentage point above the Euro area average despite generous government subsidies to keep the price of fuel and energy sta- ble. With consumers and businesses shielded from the volatility of inter- national energy prices, inflation in Malta has been driven by services and food. The latter has had a dispropor- tionate impact on households across the board but especially on low in- come families. And given that the statutory yearly wage increase (COLA – cost of living adjustment) is pegged with the retail price index operated by the National Statistics Office, the higher inflation rate has led to two substantial COLA increases in 2023 and 2024. Within this context, the broad agree- ment brokered by the government with major importers and supermar- kets to lower the prices of around 20 staple food items is a positive step. The agreement, which is expected to last some 12 months, will see prices of these products shaved by 15% on the recommended retail price. Individu- ally, the reductions may not be much but a few cents here and there on a shopping basket over a month will help to ease the impact of inflation on families. However, there are two considera- tions that have to be made. The first relates to the product list, which ac- cording to information this newspa- per has obtained appears to be re- stricted to food items. It would make sense to extend the list to a number of basic personal care products such as shower gels, men- strual products and deodorants; and clothes washing detergents. These are also necessary items that every household uses. The second consideration is a mac- ro-economic one. A similar exercise to maintain price stability had been adopted in 2007 when Malta was pre- paring for the changeover to the euro currency. At the time, the govern- ment had reached several agreements with importers to keep prices fixed for almost six months, straddling the changeover date on 1 January 2008. The idea was to allow consumers the chance to assimilate the new prices in euro while preventing importers from taking advantage of the changeover to increase prices. The agreements were on a voluntary basis and the government had created a fair label the importers could use to show they were part of the scheme. Eventually, the scheme ended in March 2008. It is important that any such arrange- ment to keep prices of basic products stable is accompanied by a timeframe to avoid having an unorthodox system in place for more than is necessary. The government will not want to create a situation of perpetual price fixing, which will only make it harder to remove at a later stage. A 12-month time window should be enough unless something really dramatic happens that would necessitate the scheme's extension, in which case it should be for a defined period. Additionally, fixed prices will not only help keep inflation in check but can also contribute to lowering the statutory COLA increase for January 2025, which might be a good thing for business competitiveness. Mitigating the impact of inflation n August 2023, the seasonally adjusted volume of retail trade decreased by 1.2% in the euro area and by 0.9% in the EU, compared with July 2023, according to estimates from Eurostat, the statistical office of the European Union. In July 2023, the retail trade volume decreased by 0.1% both in the euro area and in the EU. In August 2023 compared with August 2022, the calendar adjusted retail sales index decreased by 2.1% in the euro area and by 2.0% in the EU. In the euro area in August 2023, compared with July 2023, the volume of retail trade decreased by 3.0% for automotive fuels, by 1.2% for food, drinks and tobacco and by 0.9% for non-food products. In the EU, the volume of retail trade decreased by 2.4% for automotive fuels, by 0.9% for food, drinks and tobacco and by 0.6% for non-food products. Retail Price Volume DID U KNOW?

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