Portugal loses buying power as prices rise  .jpg

Portugal loses buying power as prices rise  


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THE PRICE of basic food commodities including bread and milk will increase by as much as 30 per cent this year in Portugal, well above the 2.1 per cent inflation rate set by the government.

The cost of bread is expected to increase in price from 15 cents to around 19.5 cents for a bread roll. According to the Associação de Comércio e da Indústria de Panificação, the association for the bread industry in Portugal, this rise in price is because of the sharp increase in the cost of flour.

In 2007, the cost of flour increased by 90 per cent because of the use of cereals for bio-fuel production instead of food production.

In poorer countries, bread is a staple food, with populations in countries such as Morocco consuming twice the amount recommended by the World Health Organisation.

The price of milk, which increased in Portugal by 12 per cent in 2007, is also set to rise by around 30 per cent this year. Around the world the rise in milk prices is attributed to the increased demand for these products from China and India.

Bread and milk are just two of a range of basic consumer goods and services that will increase in price above the level of the 2.1 per cent inflation forecast by the government. Other things that will become increasingly expensive in Portugal include public transport, gas, electricity, tobacco and road tolls.

On average, public transport is set to become 3.9 per cent more expensive, gas will cost 3.6 per cent more and electricity 2.9 per cent more and road tolls 2.94 per cent more expensive than in 2007.

The largest increase however will be the price of tobacco which is set to increase by 10 per cent this year.

Basic goods and services that will increase in price this year in line with inflation are water, university fees and hospital fees.


These price predictions mean that for the tenth year, Portugal’s population will again lose purchasing power. This is because the government has fixed the salary increase to 2.1 per cent for civil servants, which is used as a reference figure for salary rises within the private employment sector.

To avoid the loss of purchasing power, the unions of the Portuguese Public Administration are demanding that salaries increase to compensate for the rising cost of basic commodities and services.

The cost of petrol is set to follow the trend of rising in price for consumers. Between December 2006 and December 2007, the cost of a barrel of petrol on the US stock exchange increased from 61.55 dollars to 96 dollars, an increase of 56 per cent.

The North American investment bank Goldman Sachs is predicting that the cost of a barrel of petrol in 2008 could reach 150 dollars, which will affect Portuguese passenger transport and merchandise transporting companies.

Home owners in Portugal who are paying mortgages are also expected to be hard hit this year with rising monthly repayments.

Jean-Claude Trichet has said that the interest rates for the Euro zone will soon increase, which will affect European mortgage interest rates, which could reach five per cent.

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