MADRID – In 2024, consumers in Spain face the challenge of rising costs in various sectors. From mortgages to mobile phone rates, everyday life is getting more expensive.
Various newspapers provide overviews of which items will increase in price. We will summarize them here. Inflation, which has been noticeable for some time, continues and especially affects essential expenses. First, there was the pandemic, then the war in Ukraine. Despite the fact that the CPI is now far from the double digits it reached after the outbreak of the conflict, many basic products continue to rise in price. Think of rents, mortgages, food, or the electricity bill. According to the National Institute of Statistics (INE), inflation in December was 3.1%, resulting in an annual price increase of 3.55%.
Light and gas bills: what changes?
The electricity bill will become more expensive on January 1 due to an increase in VAT on electricity from 5% to 10%. This increase means an annual increase of about 25 euros. Other taxes related to electricity are also adjusted.
The gas bill will also rise, with an expected increase of 8.19% for individual natural gas consumers. The limit on the gas price via the so-called ‘Iberian exception’ is falling. This was crucial to keep the cost of the electricity bill under control in 2022 after the price escalation due to the Russian invasion of Ukraine. The government has also decided not to extend the limit of 67 euros/MWh for electricity contracts. The consequence of this decision is uncertain. It will depend on the price that companies want to set in their contracts with consumers, based on an increasingly stabilized market but without the ceiling of 67 euros.
What will not be changed is the maximum discount that the government has been applying since last year to beneficiaries of the social bonus. The cabinet has extended the 65% discount – instead of 25% – on the electricity bill for vulnerable households and 85% – instead of 40% – for severely vulnerable households until June 2024.
In January, the price of the butane gas bottle (bombona de butano) will also be reviewed. It already rose by 5% in mid-November compared to the previous two months to 15.14 euros. That is 20% below the level at which it was around that date in 2022. It may now cost more than 19.55 euros.
Mortgages
After a year of intense increases due to the interest rate policy of the European Central Bank, the 12-month Euribor closes the last period of the year at 3.679%. That is the biggest monthly decline since February 2009. The expectation for 2024 varies from 3% to 4.2%. Funcas and Bankinter expect higher figures for the end of 2024 (respectively 4.2% and 3.25%). Caixabank places the Euribor at 3.06%. This offers potential opportunities for the mortgage market in the second half of the year.
Inevitable increases in telecommunications costs
Both Movistar and Vodafone have announced price increases for 2024. Movistar will raise rates from January 15 by an average of 3.1%, while Vodafone expects an increase of 4.38%.
VAT reduction
The reduction in VAT on food from 10% to 5% on oil and pasta is currently maintained. The same applies to the abolition of the greatly reduced tax of 4% on essential products such as bread, flour, milk, cheese, eggs, fruit and vegetables, legumes, and grains. Other basic foodstuffs such as meat, fish, yogurt, mineral water, sugar, butter, coffee, baked tomatoes, and all types of preserves remain outside the bonus.
Increase in social security premiums
Contributions to social security (Seguridad Social) also increase by a tenth to 0.7% of the intergenerational equity mechanism (MEI). The maximum contribution bases are raised to 4,720 euros per month, so the part of an employee’s salary that exceeds that amount is exempt from contributions. In the case of the self-employed, those in the lowest brackets will have to pay between five and ten euros less in fees. However, those in the highest brackets will face increases of between 10 and 30 euros.
Public transport
The discounts and free use of public transport that were in force in 2023 will also be maintained in 2024, according to the government’s end-of-year decree. However, the free transport subscriptions for young people and unemployed people, announced by Pedro Sánchez, are not included. The government will continue to contribute 30% to at least a 50% discount on transport subscriptions and expects the communities to contribute at least an additional 20%. The free services of Cercanías, Rodalíes, and Media Distancia, and a 50% discount on Avant lines remain, with three lines that are completely free.
The price increases of public transport also depends on contributions from other governments. For example, the Basque Country maintains the 20% discount from 2023, while Madrid is likely to maintain its 30% discount for a total discount of 60%. In Barcelona, rates will rise by an average of 6.75% in 2024. For private transport, toll costs will rise between 5% and 6.65% in 2024, higher than the originally agreed maximum increase of 4.03%.
Five savings tips for consumers in Spain
Experts advise consumers to critically review their fixed expenses and, if possible, switch to cheaper alternatives. Some savings tips are:
The 50/30/20 rule: Divide income into three categories – 50% for basic needs, 30% for wants, 20% for savings. The 48-hour rule: Wait 48 hours before making (impulse) purchases. Take advantage of offers and discounts. Assess fixed expenses and look for more affordable options. Compare prices with the help of platforms for offers and discounts. Controlling the cost increases is not directly within the power of the consumer. However, by planning smartly and consuming consciously, consumers in Spain can more effectively meet the financial challenges of 2024.
Also read: These are the new measures against inflation of the Spanish government
