‘Stabbiltà’ scheme correlated with halt in price increases

Yet more evidence that the ‘Stabbiltà’ scheme brought the trend of rising retail prices to a halt.

A survey among firms by the Central Bank of Malta shows that the Stabbiltà scheme coincided with a halt in the trend of rising prices in the wholesale and retail sector. 

The Central Bank regularly contacts firms to ask them about their activity, and one of the questions is whether they have raised or lowered prices, or if they kept them stable. The most recent results from its Business Dialogue publication reveals that, for the first time ever, the net balance of wholesale and retail firms raising prices was 0%. This occurred in the first quarter of 2024, that is when Stabbiltà was launched. In the previous quarter, the net balance had been of 60% of firms raising prices. 

The Central Bank reports that whereas, in the fourth quarter of 2023, 70% of wholesale and retail firms had raised selling prices, the following quarter the proportion fell to 23%. The proportion which reported a decline in selling prices more than doubled to 23% from 10%, while the proportion with unchanged prices rose to 54% from 20%.

Net balance (%) of wholesale and retail firms raising prices

2020 Q422%
2021 Q122%
2021 Q238%
2021 Q378%
2021 Q444%
2022 Q131%
2022 Q264%
2022 Q360%
2022 Q482%
2023 Q160%
2023 Q273%
2023 Q333%
2023 Q460%
2024 Q10%

As part of the survey, firms were also asked on their plans for wage growth in 2024. Most firms indicated that wage increases will be more than 5%. Given that inflation is now declining, the impact of these increases will be more strongly felt by workers.

During the first quarter of the year, nearly 60% of firms stated that business conditions had improved over the previous three months, up from 52% in the preceding quarter. The share of firms stating that business activity worsened fell to 13%, from 17% in the previous quarter.

Thus, the latest Business Dialogue exercise of the Central Bank shows that, in the first quarter of 2024, the net share of firms reporting better business conditions increased to 47%, up from 35% in the last quarter of the previous year.  Conditions were more positive than before across most economic sectors, but particularly in the manufacturing and wholesale and retail sectors. Firms in the services sector had the most positive assessment across sectors. A net 54% of respondents in this sector reported higher activity in the first quarter of 2024.

Looking ahead, a net 39% of firms expected a further improvement in business activity. As a result, the net share of firms planning to invest more increased to 36%, from 10% in the previous quarter. At the same time, half of the companies interviewed reported that they plan to increase their staff levels, compared to 46% in the previous quarter.

Photo: Gustavo Fring

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