27 Mar, 2024 @ 13:00
1 min read

Inflation in Spain increases in March following rise in VAT charges for electricity

Power prices take inflation in Spain to 13-year-high as government is unhappy with the EU
Symbolbild steigende Energiekosten, Euroscheine vor einer Gaszaehler gas meter with euro banknotes BLWS244330 Symbol image rising Energy costs Euro notes before a Gas Gas Metres With Euro banknotes BLWS244330

A RISE in VAT rates on electricity bills is behind a rise in Spain’s inflation rate to 3.2% in March.

The provisional figure from the National Institute of Statistics issued on Wednesday shows a 0.4% increase on the February rate.

A year ago, the inflation rate stood at 7.5%.

Core inflation, which excludes energy and fresh food, continues to drop from 3.4% to 3.3%.

The Economics Ministry attributes the monthly base rate rise to VAT rates on electricity going up from 10% to 21% after nearly three years of reductions.

The government’s decision to return to previous tax levels is due to the recent fall in the price of electricity, in contrast to the anti-crisis measures when the wholesale market price remaining above 45 euros per MWh.

In addition to VAT, there is a rise in fuel prices, which has now accumulated nine consecutive weeks of uninterrupted increases.

“In this period, oil has advanced in the opposite direction to that of other energy products,” said Raymond Torres, director of economic affairs at Funcas.

While electricity and gas have become cheaper than pre-inflationary crisis levels, petrol and diesel prices have risen.

The main reason is regular supply cuts by the Organisation of Petroleum Exporting Countries (OPEC) to keep up international oil prices.

Food prices rise are continuing to moderate.

In March 2023, food inflation was at 16.5%, but the rate last month was just 5.3%.

Agricultural costs have been falling over recent months which will ease pressure on food prices at stores, according to CaixaBank Research.

Alex Trelinski

Alex worked for 30 years for the BBC as a presenter, producer and manager. He covered a variety of areas specialising in sport, news and politics. After moving to the Costa Blanca over a decade ago, he edited a newspaper for 5 years and worked on local radio.

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