27 April 2005

The Web

Government costs push inflation up by 0.7 per cent in two months

Matthew Vella

Malta’s inflation rate in March 2005 was up by one percentage point from February, up to 2.6 per cent and the highest since it increased from its lowest this year, 1.9 per cent, in January 2005. The inflation rate shot up to 2.5 per cent in February, partly due to the introduction of fuel surcharge and the duty on mobile telephony.
Specifically, fuels for transport had the largest upward impact on the headline rate in the Eurozone (0.27 percentage points), followed by heating oil (0.2) and tobacco (0.11).
The fast inflationary pressure brought about by increased government taxes and levies led the Malta Chamber of SMEs (GRTU) to dub the inflation rate “abnormal” when compared to high economic growth countries like Latvia, Estonia and Hungary, which have also had inflationary increases.
According to the GRTU, Malta’s rate of inflation does not reflect the any pressure caused by rapidly growing and expanding economic activity. “Inflation should reflect a fast growing output. This is not the case in Malta as both imports and exports are falling and economic growth is stagnant.”
The GRTU blamed increasing government-induced costs for the pressures on prices, which are borne by businesses and not consumers.
“While profit margins fall and more and more firms register losses the taxation authorities increase the pressure on businesses to pay more and more taxes even if many tax claims are grossly questionable.”
The GRTU urged the government to curb its deficit “at all costs” or there would be no economic growth if entrepreneurs “are squeezed out of business.”
The Eurozone’s annual inflation was 2.1 per cent in March 2005, unchanged compared to February, according to Eurostat figures. A year earlier the rate was 1.7 per cent. Monthly inflation was 0.7 per cent in March 2005.
EU 25 inflation was 2.1 per cent in March 2005, the same as in February. A year earlier the rate was 1.7 pr cent. Monthly inflation was 0.6 per cent in March 2005.
The lowest annual rates were observed in Sweden (0.5%), Finland (0.9%), the Czech Republic (1.2%) and in Denmark (1.3%), and the highest rates were recorded in Latvia (6.6%), Estonia (4.8%), Luxembourg (3.5%) and Spain (3.4%).
Compared with February 2005, annual inflation rose in 13 Member States, fell in nine and remained stable in two.
The main components with the highest annual rates in March 2005 were housing, alcohol and tobacco, and transport, whilst the lowest rates were observed for communication, recreation and culture, and clothing.

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