CNN Portugal spoke with an economist to understand whether the country should prepare for a recession and put together several savings advice that can help mitigate the effects of a possible prolonged economic crisis.
With the war in Ukraine with no end in sight, the coming times are not easy. Inflation continues to rise and fuel, housing and raw materials are trailing behind. It becomes more and more important, although more difficult, to save.
Is a recession approaching? For Ricardo Ferraz, professor of Economics at Universidade Lusófona and researcher at ISEG, it is still too early to point to this scenario. “We know that the most recent projections from international institutions point to a slowdown in the growth rate of the Portuguese economy over the next few quarters. But, at least for now, it does not foresee the country’s entry into recession”.
“However, there is enormous unpredictability in the world, so any macroeconomic scenario has high uncertainty. interruptions in energy supplies, whether prices will continue to rise and whether interest rates will rise more than what has already been announced, causing a significant shock to consumption and investment,” he added.
In the economist’s view, “a prolonged economic recession would certainly be synonymous with a profound destruction of wealth. If household consumption and corporate investment collapse, then there would be bankruptcies and layoffs”.
Since the beginning of the year, everything has become more expensive and income has not kept up with these increases. According to the accounts made by Ricardo Ferraz, “food and beverages increased by 7.6%” and, together, “prices of housing, water, electricity, gas and other fuels increased by 7.7%”. Only fuels had an “astronomical 20%” increase. And all this in the space of five months.
To try to alleviate these difficult times that are approaching, CNN Portugal also spoke with Natália Nunes, from Deco’s financial protection office. Despite the difficulties, there are still exercises that can be done on a daily basis and that at the end of the month can save tens of euros.
From housing, fuel and grocery shopping, these are some of the specialist’s recommendations.
Public transport or own car?
- If public transport user, the main advice is to find the pass that best suits your needs, if you are not a user of the single social pass. “Sometimes, there are municipalities that have some discounts, for people over 65 years old or for young people, and people are unaware of this”, recalls Deco;
- If you live relatively close to work, you can always choose to go on foot or by bicycle;
- If you really have to use own car, because there is no public transport that provides the answer, choose to share the car with other people, whether with co-workers or friends who work in the same place or in the same area. This way you can share your fuel or toll expenses;
- Before fuel the car, always try to compare the prices of the various gas stations and go to the one that offers the most affordable prices. The website of the Directorate-General for Energy and Prices can help you with this research;
- Avoid using the car for short distances that you can do on foot;
- Try to have a more wallet-friendly drive: avoiding aggressive driving, trying to maintain a constant speed, and not always accelerating and braking. Keep the engine RPM as low as possible, using higher gears that provide low RPM.
Prepare to go to the supermarket
According to Natália Nunes, it is “fundamental” that families know “how much they spend on food monthly”, in order to be able to set savings goals. After this analysis, here are the most practical tips:
- Make a list before going shopping. And maybe it’s not a good idea to do it in your head. The best thing is to look at your pantry and write down what you really need, to avoid buying items that, after all, you still had to spend or consume;
- Make a meal plan it can also help to have an even stricter shopping list, because you end up buying only what you know you are going to consume;
- Set a budget. Don’t go shopping without setting a ceiling on what you want or can spend. According to Natália Nunes, “it is important to go shopping with some time” to “be able to look and compare all prices”. Don’t forget that the cheapest prices are not always at eye level on the shelves, they may be higher or lower;
- Don’t be seduced by promotions. It is important to have an idea of the original price of the product without the promotion to know if, in fact, the promotion pays off, even when they are promotions of packs;
- Still in the field of promotions, you must be aware of the validity of the products. This is because it can be beneficial to take, for example, two detergents, but the same does not apply to yogurts. If the deadline is too short, “we run the risk of spending money”;
- Don’t go to the supermarket hungry. This is one of the factors that, as a rule, leads the consumer to buy more than what he truly needs.
Try to make as many meals as possible at home, trying to avoid food waste.
Is it time to renegotiate your home loan?
Natália Nunes recalls that the most important thing in this area is “to look at our effort rate”. the provision of home loan must not exceed 35% of net income. “This is the golden rule,” he explains.
If the installment of mortgage loans occupies about 45% of your monthly net income, you should try to understand if the conditions you have are the ones that are being practiced in the market. If they are not, you should call the institution where you have the home loan and try to renegotiate.
You should also check if the spread is adjusted to the values that are being practiced in the market. As? Carrying out some simulations on the banks’ websites or on the Banking Customer Portal of Banco de Portugal. These simulators can be used by anyone and are “a good source of condition verification”.
You should also check the amount of insurance associated with your home loan. When a home loan is made, a contract is also made with an insurance company and, as a rule, people forget to check if these values are still adjusted. The rule is the same as for the spread, make simulations or contact insurance intermediaries.
What costs are you paying to the bank?
If you have a single bank account, which always has associated costs, namely maintenance costs, consider requesting the transformation of that account into a minimum banking services account. According to Deco, it is a way to “reduce costs”;
Perhaps you have already questioned whether it still makes sense to have a savings account. Natália Nunes considers that she only does it if “it doesn’t have a very high cost”. For this, “it is necessary to seek and negotiate”. Still, a savings account remains the most effective way to put some money aside.
If you don’t have a savings account, there are two things you shouldn’t do: keep saved money in your current account, that is, in the account you use every day; or even keep money in an envelope at home.