Spain is set to bid farewell to the reduced VAT on food this summer, a move that could see grocery prices climb across the nation
The Spanish government has announced plans to terminate the reduced VAT rate on essential food items by June 30, a measure initially implemented last year to cushion the blow of rising food costs.
Initially introduced in December, the 0% VAT rate applied to basic necessities such as milk, bread, eggs, cheese, fruits, vegetables, cereals, and olive oil. Additionally, the tax reduction from 10% to 5% on pasta was extended for an additional six months.
However, with the economy showing signs of stability, authorities have informed Brussels of their intention to gradually phase out these crisis measures.
While policymakers may not anticipate a significant impact on the average consumer, many households are likely to feel the pinch, given the continual rise in the prices of everyday grocery items.
In 2023, food prices soared by nearly 20%, with olive oil prices skyrocketing by over 70%, rendering many products unaffordable for some shoppers.
Although inflation began to level off towards the end of last year, the overall cost of living in Spain remains 3.2% higher than in 2022.
Even with the reduced VAT rate in place, the food sector has been severely impacted by inflation, driven by increasing production costs and supply shortages resulting from the conflict in Ukraine, as well as reduced harvests due to drought and high temperatures.
Let’s take a look at the comparative food prices in Spain compared to the rest of Europe:
- Price Levels in 2022:
- In 2022, the price levels for food and non-alcoholic beverages in Denmark and Luxembourg were 21% above the EU average. Meanwhile, in Romania, they were 28% below the EU average.
- Non-alcoholic beverages were more expensive in Denmark (38% above the EU average) and least expensive in Romania (21% below).
- Alcohol was priced significantly higher in Finland (113% above the EU average), while Hungary had prices 18% below the average.
- For tobacco, the highest prices were observed in Ireland (161% above the EU average), while the lowest were recorded in Bulgaria (50% below)1.
- Food Inflation in Spain:
- Food price inflation in Spain has halved since 2022, but it remains well above the European Union average. Only Malta, Greece, and Croatia report higher inflation rates for groceries than Spain. Spain’s food inflation rate stands at 5.3%, making it the fourth-highest in the EU2.
- Recent Trends:
- Looking at the figures for October 2023, the annual food inflation rate in the EU ranged from 3.7% in Denmark to 10.4% in Greece. The EU average was 7.6%. Spain falls within the group of countries experiencing inflation rates above 7.5%, along with Greece, Belgium, and France3.
In summary, while food prices in Spain have experienced inflation, they still vary considerably compared to other European countries. It’s essential for consumers to stay informed and budget accordingly! 🛒🌍🍽️
