Spain extends anti-inflationary measures through next year

Spain announced on Wednesday an extension of various anti-inflation initiatives into 2024, aiming to alleviate the financial strain on its citizens despite a deceleration in inflation rates.

Prime Minister Pedro Sanchez, re-elected for another term in November, underscored the objective of building upon the progress made over the past half-decade during a post-cabinet meeting press briefing. Sanchez highlighted a nearly 2.5 per cent GDP growth for the current year, marginally surpassing the government's initial projection of 2.4 per cent.

The extended measures encompass a range of provisions, including broader subsidies on public transportation for minors and young adults, now available to all regular commuters. Additionally, the value-added tax (VAT) on essential commodities such as fruits, vegetables, pasta, and cooking oils will see a reduction.

Addressing the energy sector, a contentious windfall tax on energy firms, which generated approximately 3 billion euros in 2023, has been modified. Companies can now partially offset the 1.2 per cent levy through investments in renewable energy initiatives. Meanwhile, an existing levy on financial institutions remains consistent for 2024, following consensus between Sanchez's Socialist Party and coalition ally, the hard-left Sumar party.

In a phased approach, the reduced 5 per cent VAT rate on energy bills, instituted in 2023, will incrementally revert to the standard 21 per cent over the upcoming six months, according to Sanchez.

(With Reuters inputs)