Malta is in the transitional period that began with the reopening of business on May 4 after five weeks of lockdown. Announcing the restart, the Prime Minister spoke about a three-week transition towards the so-called ‘new-normal’.
That declaration was made from a position of relative strength: the reproductive rate of the virus was going down steadily while active cases kept falling, too; Malta’s response to the emergency earned international praise and entrepreneurs were rearing to go.
Today, even though new measures were announced, the general mood is somewhat different. Covid-19 infections are going up slightly again, rising to one-day spikes we have not seen for a month. Two patients lost the battle with the disease in the space of a week.
On the economic side, business associations reported slow sales even if no one was under the illusion of an immediate return to regular buying behaviour. After the first week of trade, the Chamber of SMEs felt the need to issue proposals to stimulate the market and back companies. One telling recommendation, calls for a nationwide campaign to support local industry and lower the dependence on imports.
The most recent data shows that imports this quarter have already fallen by a third and, although they decreased most sharply in the category of industrial supplies, consumer goods that are normally traded by the businesses that reopened this month, also declined by eight percent compared to the same period last year.
While the drop can be attributed to the sudden halt in economic activity and the dip in consumption, EU figures have also shown that industrial production in Europe shrank by over a tenth in March – durable consumer goods alone witnessed a slump of 24 percent. The situation with non-durable goods is less dramatic, but the category still fell by 1.2 percent reversing an upward trend picked up at the start of the year.
The scenario suggests a diminishing supply that will likely push prices up along the value chain. These fluctuations across EU states, which represent almost half of our imports source, reverberate loudly in Malta’s economic environment.
Businesses, particularly retailers, are put in the uncomfortable position of having either to lose revenues by keeping prices down or lose customers by revising them.
Authorities have a hard task to get on top of inflation in the current circumstances, but one way of achieving this is by nurturing domestic production. Malta remains heavily reliant on imports for everything from cereals to pharmaceutical products to organic chemicals, but by incentivising local production we have a double opportunity in energising an important business cohort while keeping the rise in cost of living to a minimum.
The nation that came together to surmount the peak of the pandemic, must keep together to overcome the economic fallout.