The Bank of Spain quantifies the «forced» saving of households due to the pandemic at 2.5% of GDP


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The Bank of Spain has encrypted the “forced” savings stock accumulated by households until the third quarter of 2020 close to 2.5% of GDP both in the euro zone and in Spain. These conclusions are drawn from an article by the central entity that analyzes household savings during the pandemic published this Wednesday.

This “forced” saving is due to the fact that, since the beginning of the health crisis, families have not been able to reach the desired level of consumption due to the restrictions adopted against the coronavirus and, also, due to the fear of contagion. «The fact that the most pronounced decline in consumption has been observed precisely in those items of expenditure associated with transport or that entail a greater degree of social interaction and which, therefore, have been most affected by the restrictions would also point to the predominantly forced nature of the increase in savings of the homes », reads the text.

Between January and September 2020, both in Spain and in the euro zone, household saving was close to 3.5 points of GDP higher than that observed, on average, in the first three quarters of the last five years, accumulating a significant part of excess savings in the form of bank deposits.

According to the Bank of Spain, this evolution of savings has been a reflection of a much more pronounced fall in household consumption than that of income, since the latter were maintained, to a certain extent, by the public aid that has been deployed to mitigate the adverse economic effects of the pandemic

The entity in turn lists several factors that have contributed to the “historical decline in private consumption”, beyond the decline in family income itself. Therefore, part of the drop in consumption would be the consequence of households’ desire to increase their savings for reasons of precaution, given the current health and economic circumstances, which transmit great uncertainty. “At this juncture, the perception of households about their future financial situation or about the evolution of unemployment has deteriorated significantly”, according to the article.

In any case, the Bank of Spain foresees that a part of the private savings stock that has accumulated during the pandemic “will be released” in the coming months due to the advance in vaccination, the gradual relaxation of restrictions and the decrease ” progressive »of uncertainty about the health and economic situation. The institution points out that the release of part of the accumulated savings would allow, in turn, “to give greater vigor to the recovery of consumption”, although it warns that the magnitude of this effect is subject to “high uncertainty”There are also factors that could limit this impact, including the possibility that households decide to maintain a “relatively high” level of savings because they anticipate future tax increases in response to the notable increase in public debt during the crisis.

Likewise, the Bank of Spain points out that the “extreme” situations in recent months could structurally modify the behavior pattern of individuals, “making them more likely to save as they assign a greater probability to this type of event. extremes’.

Finally, the entity concludes that “the extraordinary savings bag that has accumulated since the beginning of the pandemic concentrates mainly on the highest incomes, whose marginal propensity to consume is lower ”. Thus, it stands out that households with the lowest incomes not only have a lower capacity to save, but the increase in savings in recent quarters could also have been more limited or even, in some cases, have been non-existent, despite that the public support measures had contributed to preserving their income.

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