Maltese households are set to continue battling the cost-of-living crisis in 2024 according to the latest European Commission forecast, which is projecting the local inflation rate to remain significantly high. Notwithstanding the fact that the Maltese government will be subsidising energy and fuel to the tune of €320 million per year, the Autumn 2023 European Economic Forecast is projecting the inflation rate to be 3.3% next year and marginally down to 3.1% in 2025. In comparison the EU average is projected at 3.5% and 2.4% respectively

If the energy sector is taken out of the equation, the cost of living increase becomes more pronounced at 3.9% next year and 3.8% in 2025. In comparison the respective EU average is 3.6% and 2.8%. From these projections it also turns out that that whereas inflation is expected to go significantly down by 2025, the respective scenario in Malta is not so rosy as the cost of living will only experience a marginal drop.

A major cause for the rise in the cost of living in Malta are food prices with a persistent inflation rate hovering around 9%. Faced by rising costs to buy essential grocery items, households are trying to mitigate the situation by relying ever more on supermarkets, but such option brings with it logistical issues including traffic congestion and is more time consuming. Unfortunately, those with no means of transport do not have such option unless they buy online. Meanwhile, soup kitchens are reporting significant increases in the number of persons who are having to rely on their service as they cannot make ends meet. Unsurprisingly, the commission noted that private consumption in Malta has declined as a result in the loss of spending power.

Autumn Economic Forecast is also projecting that employment will remain high. However, concern has been expressed that wages will be increasing modestly. Though this might come as a surprise in the context of the record-high €12.81 cost of living allowance, in reality this will not be enough to keep the pace with inflation. The European Commission’s Autumn forecast for 2023 puts wage growth in Malta at 1.5%, making it the lowest rate in the European Union. Meanwhile, wage growth was fastest in some Eastern countries, reaching 20.2% in Romania.

Malta also ranks lowest in the EU in terms of real compensation per employee. Indeed, the year-on-year change in real compensation per employee stood in the negative at -4%.