Inflationary pressures to continue in 2023

 In Companies, Inflation, News

The effects of inflation on Portuguese consumers does not look set to ease in the early months of 2023, despite government forecasts that it will fall back to 5.8% in 2023.

What had seemed temporary, and limited to some categories of products and in a controllable way, has gradually set into the entire economy with toxic effects for company investment and family incomes.
The result is that the effects of inflation are likely to hang around this winter like a bad dose of flu for longer than had been expected with levels not seen since the early 1990s.
Concealed inflation will continue to reduce the purchasing power of families and cool investment by and in companies which are adopting a ‘wait and see’ approach.
Some companies, however, will gain as much as they have lost from the so-called windfall effect, even given extraordinary taxes of 40% on these unexpected revenues. The Portuguese State will also get more revenues from higher prices while depositors will enjoy greater interest on savings.
In 2022 inflation reached a maximum of 10.1% before falling back to 9.9% in November, with an expected 9,8% or even 9,7% for December.
However, January could see inflation increase again slightly because of the traditional January update in prices.
Motorway tolls will go up 4.9% despite Government caps, which will cost the State €140 million. Rents will go up 2%, again capped by the Government.
This is according to the national statistics institute INE which states that although salaries have risen (mostly in the public sector) by 4% in nominal terms in Q3, 2022, because of inflation they have in fact fallen 4.7%.
Private sector wages, according to the Bank of Portugal grew 5.4% in 2022, but by subtracting the inflation rates, that increase is around 0.7%.
Whilst purchasing power fell in 2022, it will likely stagnate in 2023 with a real variation on private sector salaries of zero this new year, rising to 2% on average in 2024-2025.