Inflation outpaced wage growth in 2023: KPMG survey

Inflation in 2023 outpaced the growth in wages, leaving a negative effect on people’s purchasing power, a KPMG survey published on Wednesday shows.

The report by the accountancy firm shows that wages in Malta increased by 1.5% in 2023, while inflation increased by 5.7%.

“The real effect on people’s purchasing power for 2023 is expected to be negative, as growth in prices outpaced growth in nominal income,” the report reads.

The report shows that the average wage in 2018 stood at €18,967, while the average wage in 2023 stood at €22,032. But taking into consideration that price growth outpaced income, the wage of a worker was approximately €18,254 in 2018 and just €18,359 in 2023.

“In simple terms, this means that in 2022, workers earned on average €20,953, with this increasing to €22,032 in 2023; however, slightly more than the increase of €1,079 was eaten away by rising prices, leaving workers worse off in terms of purchasing power, evident by the slight dip in the real wages,” the report reads.

The report welcomed government’s efforts in having subsidies for food and energy, but was sceptical about their sustainability. It instead suggested government should work towards improving the work force’s productivity.

Inflation to decrease drastically next year, but subsidy withdrawal might have impact

The report said the inflation rate is expected to drop from 5.6% in 2023 to 2.9% in 2024. By 2026, the inflation rate should be closer to the EU target rate of 2%

The report said the government subsidies on food and essential items has provided tangible relief to consumers, but said questions remain regarding the potential consequences it might have when such subsidies are withdrawn.

“Consumers might experience a shift in their selected consumption basket of goods due to the potential increase in the price of other products not on the list of selected items,” the report reads.

Even with a decline in the already low unemployment rate, the labor market faces ongoing issues of shortages in manpower and skills, making it difficult for businesses to retain employees and fill vacancies, according to the report.

Last September, more individuals lost their jobs than those who were hired, reversing a positive trend observed in the preceding two months. While unemployment is expected to stay steady at 2.6% this year and remain relatively low in the foreseeable future, there is a slight expected uptick in the next couple of years, potentially reaching 2.9% by 2026.

Property deeds down in 2023

The report shows that residential permits in 2023 decreased by 15%, as did commercial permits.

Similarly, in 2023 there were 15% fewer final property deeds signed compared to the previous year, and the combined value of last year’s deeds was 8% lower than 2022.

Real estate transactions saw an increase in prices compared to the previous year. In December 2023, the average value of completed property transactions stood at €252,292, marking a nearly 10% rise from the same month in the prior year.

Additionally, by January of the current year, the value of completed transactions had risen by 5.6% compared to January of the previous year.

Nationalist Party reaction

Reacting to the report, the PN stated that wages have stagnated since 2018, significantly impacting the purchasing power of the population, workers' disposable income, and overall quality of life. The rise in the cost of living has led to a notable increase in family expenses. Malta has seen the least increase in wages within the European Union in recent years.

The PN criticized the Labour Party's handling of the cost-of-living crisis, pointing out a freeze in wages over the past five years. “More than 60,000 workers earn less than €11,000 per year, and over 150,000 workers earn less than the average wage.”

The PN labelled the government's response as inadequate, particularly in supporting the most vulnerable workers who struggle to afford basic necessities.