After backlash, Portugal to hike public pensions by an extra 3.57%

LISBON (Reuters) – Portugal on Monday approved an additional 3.57% hike in public pensions from July following criticism that it was benefiting from rising tax revenues due to high inflation without sharing those gains with the countrys 3.7 million pensioners.

In October the government gave a bonus, equivalent to half a monthly pension, to all recipients but suspended the formula for calculating future pensions, which depends on inflation and economic growth. If applied, it would have increased pensions by 8% on Jan. 1, 2023.

Instead, they rose by only between 3.89% and 4.83%, sparking criticism from opposition parties across the spectrum.

In Portugal, over 1 million pensioners receive less than 500 euros per month. With inflation rampant, they have lost a considerable amount of purchasing power over the past year.

Prime Minister Antonio Costa said that with the new hike, “pensioners will have updated pensions at the same amount that would result from the law” that was suspended in October.

The parliamentary bench leader of the main opposition Social Democratic Party, Joaquim Miranda Sarmento, countered that “the government continues to take advantage of high inflation to fatten the state and only gives back to the Portuguese a little bit.”

Earlier on Monday, the government raised its 2023 economic growth forecast to 1.8% from 1.3% predicted in November, still a sharp slowdown compared to last years 6.7% amid stubbornly high inflation.

However, it also raised this year‘s inflation projection to 5.1% from 4.0%, which compares with last year’s peak of 10.1% in October. The budget deficit should end this year at 0.4% of GDP, the same as in 2022.

(Reporting by Sergio Goncalves; Editing by David Latona and Grant McCool)