Inflation in Malta

A short history of inflation in Malta

The Lira and the Peg (1968 to 2007)

Malta issued its own currency in 1968, six years after independence, and managed it against a basket of the currencies of its main trading partners rather than letting it float. For a very small island economy importing almost all its food, fuel and manufactures, the exchange rate is the main determinant of the price level, and holding it steady kept inflation moderate for four decades.

The Euro (2008)

Malta adopted the euro on 1 January 2008, replacing the managed peg with membership of the currency it had largely been tracking. Inflation has since been close to the euro area's, with the differences coming mostly from food and from tourism, which is a large enough share of the economy to move domestic prices on its own.

Post-Covid Inflation (2021 to 2023)

In Malta, prices rose fastest in October 2022, at 7.4%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.