|
Kurt Sansone
Government is confident that despite inflation hitting 3.1 per cent in July, the difference with the EU’s reference value can still be bridged by the time the European Commission and the European Central Bank deliver their verdict next year on whether Malta has achieved the Maastricht criteria for adopting the Euro.
Recent statistics for the month of July show that the 12-month moving average inflation rate stood at 3.1 per cent or 0.3 percentage points higher than the EU’s reference value of 2.8 per cent.
The 12-month average inflation rate measured by the EU-recognised standard, Harmonised Index of Consumer Prices (HICP), is the figure the Commission will take into account next June when determining Malta’s eligibility for Euro adoption.
The inflation rate has been on a constant incline since November last year but Parliamentary Secretary Tonio Fenech insisted it is “not cause for alarm.”
“We are still above the reference level but it is not a difference that cannot be bridged. Given that the inflation rate is worked on an average of the previous 12 months I expect to see the inflation rate tapering down over the next few months as the impact of the higher surcharge would have been absorbed by the economy,” Fenech told MaltaToday.
The parliamentary secretary cautioned that it also depended on the stability of the international price of oil.
The fuel index in July registered an imperceptible decrease of 0.37 per cent over the previous month but was still over 12 per cent higher than July last year.
Whether the decline in the price of fuel will gradually turn into a trend still has to be seen but it greatly depends on the stability or otherwise of world oil prices.
“Unlike the deficit, which is in government’s control, there is little government can do in terms of inflation since it is intrinsically linked to economic performance. A growing economy leads to higher inflation as people consume more,” Fenech said.
Asked whether the proposed tax cut to be implemented in the next budget risks pushing up inflation because of higher consumption, Fenech said the underlying factor for any tax cut should be that it does not have an inflationary impact.
“A change in the tax bands as is being considered will actually have a deflationary impact because it can reduce pressure on wage increases,” Fenech said.
“Government is also attentive not to increase costs in general. Even in terms of the price of oil we are using all instruments at our disposal, including hedging to try and smooth temporary oil spikes such as the recent increase due to the conflict in Lebanon.”
On the other pressing issue concerning medicines, Fenech said that government will come to an agreement with importers by not later than early September.
ksansone@mediatoday.com.mt
|
