Malta Chamber of Commerce President Marisa Xuereb warned Monday that inflation is set to consistently hit Malta for the next six to 12 months as a result of the conflict in Ukraine.

Speaking to The Malta Independent, Xuereb shared the difficulties faced by businesses in adapting to the new reality as well as what can be done to slightly ease the pressure on various sectors.

Xuereb said that each day the war goes on, the effect on businesses will keep getting worse. “Shortages have put a lot of pressure on the local market and importing basic ingredients is characterised by high importation and transport costs.”

Due to the shortages in these ingredients in the food sectors, certain governments such as Italy have made it possible to replace some ingredients in ready-made food items with others. Xuereb gave the example of companies in Italy who are replacing sunflower oil with rapeseed oil in specific food items.

This change is only made possible due to the Italian government giving the go-ahead for this. “The change would only require these companies to identify the change the same way they print the expiry date of their products. This would not require any change in the labelling of the product.”

Xuereb explained that Malta so far does not give food importers the go-ahead to import these ready-made food items with replaced ingredients. The Maltese government still requires food importers to change the labelling in order to show the ingredient which has been replaced.

This has created yet an extra difficulty in the increasing amount of problems importers face.

Throughout the conflict, the food and manufacturing industries have been affected the most with companies doing all they can to survive.

“The rise of fuel and electricity prices across the EU has steadily increased the production cost of raw materials and also transportation. Although prices in Malta are subsidised, the Maltese businesses still have to import material from abroad.”

Xuereb confirmed that prices today due to the conflict have increased by 15% to 25% compared to the same period in 2021.

The material shortage means that businesses have two options; to look for other importers who have higher prices or to replace materials or ingredients entirely.

“Replacing an ingredient in a food item is relatively easy but replacing a material in the automotive industry for example is close to impossible as that material has to go through a series of processes which qualify the material, and this takes time.”

Xuereb remarked that all businesses in Europe are going through the same thing so everyone is learning off of one another. “At the end of the day margins keep getting lower and lower which forces businesses to revise their prices as operating at a loss is not sustainable.”

With the supply chain constantly being interrupted, there is only so much businesses can do in order to absorb the costs. “These prices will not suddenly decrease if the war stops tomorrow but we have to start somewhere in order to find a sense of stability once again.”