The moderation of inflation that is being recorded may have repercussions on elements as diverse as the reduction in VAT on food, which the Council of Ministers has just extended this week, and the salary increases for 2024, as stipulated in the Agreement for Employment and Collective Bargaining (AENC), signed by employers and unions in May.
On the one hand, VAT. In its decision this Tuesday, the Government agreed to extend until the end of the year the suppression of VAT on basic foods, such as bread, eggs, fruit and vegetables, and the reduction to 5% of other products such as pasta and oils . The point is that the extension is conditional on the year-on-year rate of core inflation being above 5.5%.
Specifically, if it falls below this rate in September, then this deduction will be eliminated, and basic foods would again pay 4% VAT and pasta and oils 10%. With the advanced data that the INE offered this Thursday, an underlying of 5.9%, if it moderates more than four tenths, the Government will eliminate the extension.
It is a strategy designed to update the anti-inflation measures according to the data that is obtained and suppress them when they are not considered essential.
On the other hand, the AENC, which serves as a reference for the negotiation of agreements, establishes a salary increase of 4% this year, with a clause linked to inflation. If the general interannual CPI for December 2023 were higher than 4%, a maximum additional increase of 1% will be applied with effect for January 2024. In other words, what is at stake according to the December data is this 1% extra increase expected.
To have a reference of the possibilities that this percentage is exceeded, the Funcas forecasts with the data until May anticipate a year-on-year rate in December of 5%, and those of BBVA Research between 4.5 and 5%. In other words, if these provisions are met, the clause would be activated, but it would not be the case if a greater moderation of prices is achieved.
