MADRID - Privately-owned supermarket chain Mercadona on Friday approved wage increases for its entire workforce in Spain and Portugal, saying they would be in line with the official rate of inflation recorded in December.

"The aim is to maintain the purchasing power of all people who form part of Mercadona, because they are the customers' best asset," the retailer - Spain's largest by revenue and market share - said in a statement.

The measure will enter into force starting from the January payslips of the more than 96,000 employees in Spain and Portugal, matching December's Consumer Price Index (CPI) of each country, Mercadona added.

European retailers have faced growing demands from their workers for pay rises to match or surpass inflation, which at its peak reached three-decade highs in several countries, including Spain and Portugal.

Spanish consumer prices rose 5.8% year-on-year in December, flash data from the National Statistics Institute showed. Average annual inflation was 8.4%, the highest since 1986.

Meanwhile, Portugal's annual CPI for December stood at 9.6% as the average rate for 2022 jumped to 7.8%.

The hike will not only affect workers' base salaries, as stipulated in its collective bargaining agreement, but also their total wages including bonuses, Mercadona said.

The group added that its recent cost-cutting measures to offset rising fixed costs had resulted in a productivity increase of 9% and savings of more than 200 million euros ($213.2 million) this year.

In January, Mercadona bumped up salaries by 6.5% in Spain and 2.7% in Portugal.

It had a share of 25.8% of the Spanish market this year, 0.9% more than in 2021, according to a study by consulting firm Kantar, posting a net profit of 623 million euros and gross revenue of 25.5 billion euros. ($1 = 0.9380 euros)

(Reporting by David Latona; Editing by Kirsten Donovan)