The measures to contain the rise in prices and social support have not prevented the Portuguese from losing purchasing power in 2022, with an average inflation rate of 7.8% and the uncertainty of what will come in 2023.
Portugal leaves 2022 after having reached levels of inflation not seen for 30 years. It peaked at 10.1% in October and, although it moderated for the next two months, it ended December still at high 9.6%.
On average, prices rose by 7.8% this year, according to the estimate released this Friday by the Portuguese National Institute of Statistics (INE), which exceeds by four tenths the most updated forecasts that the Government of the socialist António Costa had.
The Executive has launched throughout the year different types of measures to alleviate the increase in the cost of living, but experts agree that they have not been enough to prevent the Portuguese from losing purchasing power.
“There was no replacement of yields, especially wages, to compensate for the trend in inflation,” economist Jose Reis told EFE.
INSUFFICIENT MEASURES?
From January the minimum wage will rise to 760 euros, salaries in the Public Administration will grow on average by 5.1% and the Government has implemented measures to encourage that same increase to be transferred to the private sector.
Pensioners will have a rise of between 3.53% and 4.43% and received half an extra benefit in October, measures that caused a stir in the country and led the Government to ensure that, if inflation closed higher than expected, there would be a new update.
In addition, vulnerable families received several grants (360 euros in total) and there were “cheques”, of single payment, of 50 euros per child and 125 euros per worker with incomes of up to 2,700 euros per month.
Reis believes that the Executive could have gone “further”: “There was budgetary margin so that the Government could have been a little more generous” and replace more of the lost purchasing power.
Another expert, António Costa Pinto, told EFE that the Socialists “sacrifice the current most generous measures of social support for budget balance.”
“It’s ironic that it’s the right-wing opposition that’s asking the government to spend more,” he says.
A STRUCTURAL PROBLEM
Inflation has caused a loss of purchasing power in a country that in recent years was already having problems in that regard.
Purchasing power fell by 1.1 percentage points in 2021 and stood at 75.1% of the European average, leaving Portugal in 16th position among the 19 countries of the euro zone.
“There is a problem of wage justice in Portugal,” says Reis, who says that the increases in the minimum wage in recent years have not managed to raise average wages at the same pace and that the Portuguese economy is too specialized in sectors that are not very productive, such as tourism.
These two structural factors have caused Portugal to lose space compared to other European countries.
2023: UNCERTAINTY
Despite the relief at the end of the year, the peak of inflation in Portugal is still to come: it will probably be reached in January and February, according to the governor of the Bank of Portugal, Mário Centeno.
The Costa government expects average inflation in 2023 to be lower than this year’s of 4%.
Will the Portuguese endure it? “So far they have endured, but with difficulty (…) Everything will depend on the international scene,” anticipates analyst Costa Pinto.
The economist Reis believes that if purchasing power continues to fall “it would have very strong consequences, a greater stagnation of the economy and most likely a great incentive to emigrate.”
“It is impossible not to correct what is happening in terms of wages in Portugal,” he concludes.
