The COVID-19 pandemic is already having and will continue to have unprecedented effects on the world economy, with a negative impact not only on the financial situation of companies, but also on households. In Portugal, and even with State support, it is thought that we will see, on average, a reduction of 5% in household disposable income and around 8% in income from employment. Younger households will also be the most affected, according to data from the Bank of Portugal, released this week.
In a statement, the Bank of Portugal has said that "the reduction in activity resulting from the pandemic containment measures has a negative impact on disposable income and, as a consequence, on consumption decisions". The regulator presented the results of two exercises carried out with the aim of simulating the short-term consequences of the pandemic on the financial situation of companies and households and concluded that, after considering the income support measures implemented by the Government, "on average, the monthly income of households residing in Portugal is reduced by 5.3%, as a result of an 8.2% reduction in employment income".
According to the calculations presented by the regulator, in its May economic bulletin, in the pre-pandemic scenario the average net income of households was around 871 euros - this value falls to 800 euros in the post-pandemic case. If we look at disposable income, the impact is smaller, in an estimated reduction of 5.3%, where the monthly net disposable income goes from 1,566 euros to 1,482 euros per month.
The negative impact on disposable income will, moreover, be more pronounced for households with higher income and those in younger age brackets. According to the analysis of the institution led by Carlos Costa, the average value of income less expenditure on non-durable goods, current services, loan instalments and rent for permanent housing, "is reduced by around 8% compared to its value before the pandemic, after considering income support measures as well as the moratorium on mortgages for the purchase of permanent housing and the exceptional regime for situations of late payment of rent".
He goes on to say that in all income classes and age groups, "the moratorium on benefits has a more significant impact than the moratorium on rent", and that in general, despite everything, "they have a particularly favourable impact on lower-income families and younger families".
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