Inflation in Portugal

A short history of inflation in Portugal

Revolution and the Escudo (1974 to 1985)

Portuguese inflation ran above 20% for much of the decade after the revolution of April 1974, reaching the high twenties more than once. The causes were the disruption of the revolution itself, the return of hundreds of thousands of people from the former African colonies, two oil shocks in an economy importing all its crude, and wage rises that the new democracy could not refuse. The escudo was devalued repeatedly to keep exports moving.

Convergence and the Euro (1986 to 1999)

Joining the European Community in 1986 changed the trajectory. Inflation fell steadily through the following decade as Portugal aligned its policies with the countries it now traded with, and meeting the conditions for the euro required getting it near German levels, which the country achieved in time to join at the launch in 1999.

Post-Covid Inflation (2021 to 2023)

In Portugal, prices rose fastest in October 2022, at 10.6%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.