Impact of Ukraine invasion this week projected to cost Malta €200 million more this year – Clyde Caruana

Last Updated on Thursday, 10 March, 2022 at 2:45 pm by Andre Camilleri

The economic effects of the war in Ukraine this week seems to have cost Malta €200 million more in projected price increases this year, Finance Minister Clyde Caruana has said.

Finance Minister Clyde Caruana and President of the PN Administrative Council and election candidate Graham Bencini were debating the topic of tax, during an electoral business discussion hosted by The Malta Chamber of Commerce.

Everyone is concerned with the war in Ukraine, Caruana said. “This is also taking over the discussions in the electoral campaign. Yesterday I said that the war is worrying me more than Covid-19 did from the economic aspect. This, as the way things are evolving, the way things are heating up, it is no longer just a war with bombs but is also becoming an economic war, of which the impact will not be small.”

“Yesterday I said that this government has to do whatever it takes to save the economy. I said this as I am aware of the massive impact this war is causing. Last budget I said that we would allocate €200 million this year for the rise in prices anticipated due to Covid-19. The war, in this week – and we do not know how long it will last or the kind of retaliation – it already seems that it will cost us €200 million this year. This in just one week and we have to add on another €200 million.”

“The way fuel is rising, how cereals and wheat prices are rising… Since everyone is escaping from Ukraine, all the fields that supply a substantial amount of wheat worldwide will have nobody to work them.”

“The way they are rising is something we have never seen, and it will be drastic. I am not saying this to cause fear, but to show that despite the craziness of an electoral campaign where everyone thinks that candidates are only focused on getting votes and nothing else, we are monitoring the serious situation. I am saying this to show that we are on the ball.”

Asked about the impact on electoral proposals, Caruana said that the worst thing that could happen now is to focus on one thing and forget everything else. 

He said that the pandemic cost Malta money, but the country’s job market is still present. “The biggest headache for businesses is to find employees. It’s a nice problem to have in a way. Yes the war will cost us money, but the worst thing we can do is just focus our resources there and forget everything else. We must continue to oil the economy like we did during Covid. So yes, we will need to broaden our fiscal policies more and we will need to help people more.”

He said that the government will need to help people more. “What we are going to do now to help people is not a political stunt. 99.9% we will need to repeat it later in the year and we must do this to keep consumption moving. At the same time there must be an enormous cushion for business. The worst thing we could do is not pay attention to all of this, let expenses infiltrate into business – and there will be some expenses for businesses, you cannot prevent everything – but the worst thing would be for all expenses to infiltrate, for demands for increase in salaries to explode due to inflation and result in our businesses not being competitive. That is the worst thing that could happen.”

He said this is the chance to keep Malta’s competitive edge.

In light of all this, the electoral promises still make sense, he said. Caruana said that what the PL is promising, they are thinking through. “Yes the country will need more loose fiscal policy, the European Central Bank might in future raise interest rates, and so this is the moment to know what we are doing in our fiscal policy, as we have known what we were doing in the past two years.

Graham Bencini said that the PN is following the Ukraine war closely. The PN is also worried about it. “But this is not the first time we faced international problems. When Lawrence Gonzi was Prime Minister, there was an international recession and there was the Libyan crisis also. So when the minister says that we need to do whatever it takes to save the economy I agree, as we have done in the past. We had done all we could to save the economy and jobs. So from that aspect I think both parties are on the same page because, ultimately, we are in politics to improve people’s lives, to save jobs and increase jobs.”

Bencini said that the situation in Ukraine is volatile, so you cannot have proposals and change them. “We have our proposals that are fixed and we are determined to make them come through. We will not increase taxes or VAT and we will not increase social security contributions, as the minister claimed yesterday.”

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