The Bank of Portugal forecasts that average wages will rise by 4.4% in 2024 and real household disposable income will rise by 4%, according to the institution’s economic bulletin published this Friday.
The report, presented this Friday in Lisbon by the head of the institution, Mario Centeno, indicates an increase in average wages in the economy of 4.4% in 2024 and 3.8% in 2025 and 2026, after an increase of 8% in 2023.
According to the regulator, the slowdown reflects the expected decline in inflation, “keeping growth in real terms at the level of productivity,” which is “consistent with the weight of wages” in gross domestic product (GDP) approaching the levels observed before the pandemic.
This evolution will be one of the components influencing household real disposable income, which is expected to grow by 4% in 2024 and by 1.9% in 2025 and 2026, following a 1.9% increase in 2023.
“These successes are associated with a decrease in inflation and the dynamics of wages and social benefits. A reduction in direct taxes will also contribute to an increase in disposable income in 2024-25,” he points out.
The Bank of Portugal (BdP) expects private consumption to grow by an average of 1.9% between 2024 and 2026, in the context of rising real disposable incomes and rising savings.
“In 2024, subdued private consumption growth relative to income and rising savings rates reflect the need and opportunity to provide a financial cushion in a high interest rate environment,” he says, acknowledging that for indebted households, higher interest rates will mean an adjustment in consumer spending costs downward.
In 2025 and 2026, consumption is expected to grow in line with available income, “stabilizing the savings rate at levels higher than in the pre-pandemic period.”
“These savings numbers, coupled with weakness in housing investment, result in increased financial capacity for households, which must continue to be partly directed toward debt repayment,” he points out.
The BJP forecasts that the labor market should continue to develop favorably with growth in employment (0.7% in 2024 and 0.5% in 2025-26) and real wages, while the unemployment rate should remain stable at 6. 5%.
The watchdog expects Portugal’s economy to grow by 2% in 2024, with inflation falling to 2.4%.
Author: Lusa
Source: CM Jornal
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