As long as the current economic situation persists and the Portuguese government continues with its zero VAT policy, it is expected that residents of Spanish border regions will continue to travel across the border to save money. The reduction of VAT on necessary food items in Portugal has encouraged numerous residents in Galicia, Castile and León, Extremadura and even Andalusia in Spain to travel to Portugal for their grocery shopping. This means that many Spaniards are now benefiting from the VAT cuts on food products in Portugal by crossing the border to make savings at supermarkets.
Zero VAT on essential food items in Portugal
Starting from April 2023, the Portuguese government has implemented a zero VAT rate on 44 essential food products, including fresh, chilled, and frozen meats, fish, vegetables, rice, pasta, cheeses, milk, yogurts, certain fruits such as apples, pears, oranges, and melons, as well as legumes and vegetable drinks. This measure was introduced to alleviate the financial pressures caused by high inflation in the country, and it will be in place until the end of October, subject to provisional conditions. Some products have already seen a price drop ranging from 6% to 19%.
Spanish residents grocery shopping in Portugal
Consequently, there has been an emergence of a new pattern in Spanish towns that are situated near the Portuguese border, especially in the north-western region of Galicia, but also in other parts of the country that are close to the Portuguese border. The trend involves residents in Spain travelling to Portugal to purchase groceries and benefit from the reduced prices thanks to the VAT cuts.
How much cheaper is it to shop in Portugal compared to Spain?
In order to compare supermarket prices, the Spanish media has done the hard work for us. La Sexta, a Spanish news outlet, conducted a comparison test of supermarket goods in Galicia and across the border in Valença do Minho, Portugal. They discovered that the Portuguese supermarket offered a 26.5% lower price on a basic shop.
Another Spanish channel, Antena 3, also conducted a price test by comparing the cost of a litre of milk, chicken, a loaf of bread, and 3 oranges in a Portuguese supermarket, which amounted to €5.37. In contrast, a supermarket in Tui, Pontevedra, charged €8.50 for the same items, resulting in a difference of over €3.
Inflation in Spain: what will happen in 2023?
Preliminary data from Spain’s National Statistics Institute (INE) indicates that the country’s inflation dropped to 3.3% YoY in March, decreasing from 6% in February. This makes it the lowest rate among significant Eurozone economies.
However, in spite of inflation seeming to decrease and despite the Spanish government’s reduction of VAT on food products, prices in Spain have continued to escalate. According to INE statistics, prices in February were 6% more expensive than the same period last year, with food costs increasing by 16.6% in the last year, which is the highest inter-annual rate since January 1994. As long as this trend continues, and the Portuguese government maintains its zero VAT policy, residents of Spanish border regions are expected to continue travelling to Portugal to take advantage of the lower prices.