This is a situation that has, to a large extent, been created by government following the hasty increase in VAT from 15 per cent to 18 per cent as from 1 January. The GRTU had argued all along that an increase in VAT would distort the economy at a difficult time. This is exactly what the rate of inflation is now proving.

National economic output is low and the demand for goods and services remains stagnant. The removal of levies and the opening of the markets for a wide range of food and beverage items as well as the subsidies to local agricultural products should have lead to a sufficient dampening of inflation’s pressures to balance the negative inflation impact of the increase in imported products. An economy like Malta’s, with hardly any registered economic growth and with increasing unemployment caused by reduced total economic output, should not be suffering from a rate of inflation of 2.8 per cent.

GRTU insists that prior to the introduction of hasty fiscal measures, the government should seriously evaluate the economic and social impact. The chamber insists that Malta cannot take additional taxation. Instead government should strive to curtail public expenditure.

Current public expenditure is at a high level of 50 per cent of GDP while sustainable public revenue is at a high of 44 per cent of GDP. Economically, the country cannot take additional taxation and government should strive to cut public expenditure and avoid additional measures that further feed inflation. There is no way that unemployment will fall and economic growth revive if government insists on a policy of bureaucratic impositions on enterprises and consumers.