Economic growth is slowing down. This is one of the main consequences of the war, and Portugal does not forget this trend. And the bill is paid by both consumers and businesses. “For Portugal and other distant countries, the main consequences of the war were to increase the price shock of the last phase of the pandemic. What is now called “inflation” and the associated rise in interest rates are the main symptoms. The painful period of abnormally low rates is over,” said Joao Cesar das Neves i.

But the state treasury thanks you. Public administrations recorded a budget surplus of 432 million euros until July in public accounts, an increase of 7,589 euros compared to the same months in 2021, a period still affected by the pandemic. However, compared to the first half of 2022, the accumulated balance has decreased by 681 euros. According to the latest budget data, tax and fee receipts increased by 17.2% compared to the same period in 2021 (up 13.6% compared to the first seven months of 2019). Compared to June of this year, there was a change of 21.6%. “This evolution is driven by the contribution of tax revenues (21.1% compared to 2021 and 12.5% ​​compared to 2019), in particular VAT refunds (+24.7% compared to 2021 and +16. 5% compared to 2019). compared to 2019), as well as contribution revenue (+9.6% compared to 2021 and +16.2% compared to 2019), which reflect the recovery of the economy in recent months compared to the previous year,” — said in a statement from the Ministry of Finance.

Inflation

An inflation rate that is breaking record after record – according to the latest data from Eurostat, annual inflation rose in July to 8.9% in the eurozone, compared to 8.6% in June this year and 2.2% in July 2021. , while in the European Union (EU) it reached 9.8% – this is seen as one of the main negative impacts on the Portuguese economy and beyond.

The DECO reports leave no room for doubt. Stocking a pantry has become more expensive since the start of the war in Ukraine, and currently Portuguese families may have to pay €209.81 for a basic food basket, up 14.26%. And the values ​​went up. “The basket of essentials this week costs €209.81, which is 1.48% more than it cost just a week ago (August 17) and 14.26% more than on the eve of the explosion. (February 23),” the organization said in a statement.

The contribution to this growth is largely made by the cost of fish and meat, that is, the categories of food products, the cost of which has increased the most over the past six months. From February 23 to August 24, the price of fish increased by 19.10% (plus 11.52 euros). To buy just one kilogram of salmon, hake, horse mackerel, black sheath, sea bass, sea bream, perch and cod, the consumer may now have to spend an average of 71.83 euros. In meat, the increase was 17.14% (€5.53) over the past six months. If you calculate that for just one kilogram of pork loin, whole chicken, pork chops, pork tenderloins, turkey steaks, cooking veal and turkey leg, the cost can now average 37.77 euros, according to the consumer rights organization . .

According to Paulo Rosa, senior economist at Banco Carregosa, inflation is the main negative impact on the Portuguese economy. However, he acknowledges that it could be lower if the government pursued an expansionary fiscal policy based on greater tax cuts on imported fossil fuels, the elimination of most of the ISP (tax on petroleum products), as well as VAT. , namely the one that accounts for hydrocarbons.

And do the math: ISP revenue from the Portuguese executive grew by 84.7 million in the first half of this year compared to the same half of 2021 to 1,608.6 million. Also between the same half years, VAT increased by about 25 % from 7920.7 million to 10052.3 million euros.

The economist also says that growing fears of cuts in gas supplies from Russia and the approach of winter will continue to put pressure on inflation in the eurozone and could force the European Central Bank (ECB) to further cut monetary policy, based on a higher-than-expected increase in interest rates. rates. “Given this scenario, the deteriorating economic outlook in the euro area is intensifying. In this context, the aggravation of difficulties for the national economy and for the Portuguese government is emphasized.”

And he does not hesitate: “Fighting inflation and its evils is more important for the ECB than preventing a recession. Thus, this persistence of the central bank will become more and more visible, even if it causes a more or less deep recession. It is also true that a recession is deflationary, increasing unemployment, lowering disposable income, slowing household spending, and ultimately easing pressure on prices.”

Energy

Along with inflation, energy is also another face of consequences that affect all countries, to the extent that the President of the European Commission yesterday defended “emergency intervention and structural reform” in the European Union’s electricity market, recognizing the “limitations” of the current configuration, exacerbated crisis. “Rising electricity prices expose the limitations of the current configuration of our electricity market, [que] designed for different circumstances. That is why we are now working on emergency intervention and structural reform of the electricity market,” said Ursula von der Leyen.

For Ricardo Evangelista, CEO of ActivTrades Europe, “the rise in energy prices was the most visible impact of the invasion of Ukraine.”

XTB analyst Enrique Tome also highlights that energy prices were affected by the price scale “further adding to the inflationary pressures already felt at the time”, with gas growth more problematic after EDP Comercial announced it was going to increase gas prices for families at an average of €30 per month – plus fees and taxes, which would equate to another five to seven euros in fees and taxes – and that Galp will follow suit, without disclosing, however, what the significance of this increase will be. Yesterday it was Goldenergy’s turn to also raise the gas price by an average of six euros for most customers starting from October.

To “rock” this increase, families and small businesses will be able to access a regulated market for this energy. “Prices of the regulated market will be less than half of the prices of suppliers who have announced their increase. We really believe that with this change, many consumers will have lower gas bills than the current ones,” said the Minister of the Environment.

According to Duarte Cordeiro, this measure will be valid for no more than 12 months and could cover up to 1.5 million customers. Another measure concerns the relaunch of the Bilhar Solidarity program, for which funding was mobilized from the Environment Fund, recalling that “two weeks ago it introduced a maximum price for the sale of gas cylinders, a measure that protects more than two million consumers.”

As for the possible increase in energy, and after the “war” with Endesa, which announced an increase of about 40% and which eventually backed down after disagreements with the government, the executive believes that the Iberian mechanism contributed to lower wholesale market prices. [em Portugal]limiting the price of gas for electricity generation,” as the regulator advocates, by allowing producers to sell electricity to suppliers at prices lower than in major European countries such as Germany and France.

fuel

Oil was also one of the commodities where price increases were felt the most. After the invasion, there was a surge in the cost of a barrel of European benchmark Brent, which peaked in March at $139.13. As of yesterday, diesel fuel is expected to rise by 11 cents to 1887 euros, while the price of gasoline should remain at 1778 per liter. It is true that values ​​continue to benefit from three government mitigation measures that will be reassessed later this month. The ISP rebate, equivalent to a VAT rate cut from 23% to 13%, offset through the ISP, a reduction in additional VAT revenue, and a suspension of the carbon tax update reduced the levy by 28.2 cents, the tax on diesel fuel by 32.1 cents. on gasoline.

real estate

The real estate market is not forgetting these shocks and affects all consumers: not only those who have a house or who are about to buy it, but also those who rent. In July, the European Central Bank (ECB) announced a 50 basis point hike in interest rates – up from the originally planned 25 basis points – that would penalize anyone with credit to pay back or those about to close a business. It was the first rate hike in more than a decade to try to stop inflation escalating, and all indications are that the central bank should repeat the same hike at its next meeting, scheduled for September. This comes at a time when the US Federal Reserve (Fed) is also making headway in raising rates.

As for leasing, they sound the alarm. The explanation is simple: the contracts are indexed to the growth of the average inflation rate for the 12 months ending in July. The final value will be presented tomorrow, but there are those who indicate values ​​close to 5%. This means that landlords are free to ask tenants to increase this order of magnitude from January 2023. A significant amount, given that this year the rent has increased by only 0.43%.

A scenario that has already led the Owners’ Association to ask the Portuguese government to follow the example of Spain, which has imposed a maximum limit of 2% on updating the values ​​that will apply next year. Roman Lavadinho has already come to i to assure that “a rent increase of 7% or 8% is completely unaffordable.” But to do so, he advocates that the government publish a rule defining a maximum lift ceiling.

The president of the National Association of Owners is of the opposite opinion, believing that “the lease agreement is respected and only remains to be observed,” which excludes the scenario of inhibitory intervention in rent increases. And he does not hesitate to point the finger at the executive branch: “This government has done nothing for seven years, except to oppress the owners.”

The opinion shared by the Lisbon Association of Owners indicates that more than 30% of owners in Portugal fear the possibility of an administrative rent freeze due to rising inflation (see page 11).

markets

Market trading in recent months has been characterized by high volatility. The explanation is simple: the fear of a global recession affects investor sentiment. “The first half of the year was one of the worst in recent years, influenced by the restrictive monetary policy adopted by the major central banks, along with concerns about the risk of a recession, as well as the Russian invasion of Ukraine, which took over the markets. unexpectedly and provoked a strong decline in risky assets,” says Enrique Tome.

But, on the other hand, gold was one of the materials that increased in value, precisely because it was seen as a safe-haven asset.