Malta’s economy shrugs off oil shocks thanks to policy shift

The strategic decision taken by the Maltese government to ensure energy price stability is having strong impacts on inflation and underpins the resilience of the country's economy.

A study by a Central Bank economist, Germano Ruisi, shows that Malta’s economy no longer suffers too much when there is an international oil price shock. The Central Bank economist compared the 2009 crisis to the post-pandemic shock and found very different results, attributing this to the different policies when it comes to fiscal support on the part of the Government.

Ruisi notes that after the 2009 crisis energy prices in Malta were moving in line with international ones while from 2015 onwards there is stability, even though international oil price volatility has been very substantial. He claims that the policy of stability embraced by the Maltese government is extraordinary in the international context.

The energy shocks after 2009 led to a significant slowdown in economic activity, which have taken twice as long for the economy to recover when compared to the recovery time from the very much larger external shocks observed recently.

Oil price shocks, in addition to having a strong effect on economic activity, used to increase the inflation rate by up to 1% per every 10% increase in the international price of oil. This effect has now disappeared due to the energy price stability policy.

All this indicates how beneficial the strategic decision taken by the Maltese government to ensure energy price stability. This is having strong impacts on inflation and underpins the resilience of the country’s economy.

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

Menu