Government unveils €2.4Bn inflation offset package

 In Cost of Living Crisis, Economy, News

Portugal’s government has unveiled a €2.4Bn package to help families and pensioners weather the rising tide of inflation which currently stands at around 9.1%.

The Government has earmarked €1Bn for pensioners who will receive a bonus worth half of their monthly pension from October. Pensioners will also see an overall increase of between 4.43% for those on the lowest pensions and 3.53% for those whose pensions are €2,659 or over from 2023. In terms of the bonus, a pensioner who receives a pension of €500 (gross) will get an extra €250 in October.
Cheques of €125 will be paid into the bank accounts of employees and those on green receipts with incomes of up to €2,700 per month to help offset inflation in food and energy costs. The payments will also be made in October. Tax payers will need to indicate their IBAN both on the web sites of the tax authorities (Finanças) and social security (Segurança Social). Individuals with dependents will receive an additional €50 for each child or young person in the household up to the age of 24.
The government stresses that the handouts will not affect either the government’s target for Portugal’s public debt (currently at 126.7%) or its budget deficit (1.9%). The President of the Republic, Marcelo Rebelo de Sousa called the lifebuoy measures “adequate, cautious and prudent”.
The Finance Minister, Fernando Medina, said that government’s deficit target of 1.9% would remain on track and that Portugal’s public deficit would fall back to at least 120% of GDP.
Portugal’s economy has also be revised upwards by the government to 6.4% GDP growth.
The Government has also set a 2% limit on rent increases in 2023 – good news for tenants but bad news for small-time property renters who think it unfair given the relatively low rents stipulated by some contracts.
However, it will exempt 9% of taxable income from rents to offset the temporary cap on the rent increases that landlords can charge. Moreover, the exemptions will be greater for long-term contracts.
In the case of electricity, the government will ask parliament to vote through a VAT reduction from 13% to 6% for consumers on low output contracts. The measure would start from next month and remain in force until December 2023.
As for gas, the estimated saving for a couple with two children is 10% and clients will be able to transfer their contract to the regulated market.
In terms of public transport, the government will freeze the price of monthly bus and metro passes and CP train tickets.