A working group within MCESD has been set up to discuss Inflation. The support of a technical expert is being sought to carry out a study, to assist the working group.

The timeframe for the preparation of said report is that of three (3) weeks from date of notification of award.

An outline of the report, agreed upon by all Working group members, is presented hereunder for reference.

Disclaimer: Given the strict deadlines, the final report might be different to this outline


Thus, MCESD is seeking quotations for the preparation of this report.

Such quotations are to be sent on [email protected] by Wednesday 13th March 2024.


Outline Report on the recent developments in inflation, causes, risks, and recommendations.

Overview of Report Structure

The report will first focus on the recent developments in overall inflation as well as those in the main subcomponents.

Secondly, the report will outline the possible causes of the recent surge in inflation. This section should decompose between foreign and local causes of inflation.

Thirdly, an outlook of inflation should be outlined. An important part of this section should be risks to inflation.

Fourth section should then focus on recommendations, which could be split into short-run and long-run recommendations.

Section Details

Section 1: Recent developments in inflation

  1. HICP and RPI annual inflation – comparison also to EA/EU as well as specific countries
  2. Main contributors to overall HICP inflation
  3. Contributions to food inflation
  4. Contributions to Goods inflation
  5. Contributions to Services Inflation
  6. A measure of persistence – overall (and core) inflation vs long-run average – also for EA and other specific countries
  7. Low-income and retired household inflation rate (based on a Central Bank Malta (CBM) study)

Section 2: Causes of the recent surge in inflation

  1. A brief timeline of events – COVID-19 recovery, Russia-Ukraine conflict – mapped on HICP inflation – make reference to the Fed Global Supply Chain disruptions index.
  2. Survey data – reference to Business Performance Survey, Wage inflation Survey, and CBM Business Dialogue (The timing of the surveys is of relevance given the very dynamic market conditions).
  3. Foreign/import price pressures:
    1. Chart on commodity prices – oil, gas, FAO food price index, and metal prices
    2. Transport Costs – use Baltic Dry Index (BDI) and other indices beyond BDI given our very high port charges and related local costs. As an island economy this is of particular relevance.
    3. Reference to consumer prices of countries from whom Malta imports
  4. Local price pressures:
    1. GDP growth vs EA GDP Growth
    2. Profit margins
    3. Unit labour costs and Vacancy-Unemployment ratio (the latter as a measure of labour market tightness)
    4. Inflation expectations – use commission survey.
    5. Fiscal deficit vs EA fiscal deficit
  5. Small size of our market:

Because of the small size of our market, we have fewer operators than are typically found in larger markets. But oligopoly does not necessarily mean collusion. If long-term commercial viability is dependent on size, operators are aware they must grow their market share to survive and they compete aggressively. This often results in margin squeeze, lack of investment, and lack of productivity gains over time, which may also have inflationary repercussions, especially when wage inflation is significant. Explore this perspective.

  1. The impact of the recent surge in inflation on house price affordability
  2. Output gaps as a measure of demand pressures

Section 3: Inflation outlook and risks

  1. Outline inflation projections already published by the CBM, the Commission, and other forecasters.
  2. Risks –Suggest that a short survey is prepared and circulated among the members of the working group to outline the risks, such that the risk section will reflect the opinions of all members (ranked/averaged accordingly)

Section 4: Recommendations

  1. A summary of already existing government measures
  2. Short-term recommendations:
    1. Other measures that can be implemented now to reduce inflation persistence.
    2. Measures that mitigate the impact on lower income households (and possibly on other segments of the population)
  3. Long-term recommendations:
    1. Competition and market concentration
    2. Productivity – including traffic, skills, etc
    3. Labour Market – including challenges related to foreign workers.
    4. Public sector efficiency