Savings skyrocket in Portugal
The lockdowns imposed by the government and fears over jobs and the future of the economy have led families in Portugal to save considerably more in 2020 than they did in 2019.
This is according to the Bank of Portugal in its economic bulletin published on Wednesday. Richer and upper-middle class families were, not surprisingly, those who managed to save the most, often through savings accounts, schemes and bonds.
In the second quarter of last year, as the virus took hold and large swathes of the economy were shut down or were operating at a minimum, the savings rate went up by almost 20% of available income – a record amount in recent years.
With many people still working remotely and with various restrictions on hours, consumer spending and controls on numbers at events, in restaurants and bars, “people are likely to continue saving for the coming years,” says the BoP.
The Governor of the Bank of Portugal, Mário Centeno calculates that between 2020 and 2023 families resident in Portugal are capable of squirrelling away an additional €17.5Bn in savings.
A good chunk of this money is cash that was not spent on consumer items, which means that as families become more confident with better lifestyle conditions in the near future, the economy will likely grow more than anticipated as private spending goes up.
That could pose a risk according to the Bank of Portugal because if too much in savings is spent on consumer and retail spending sprees, GDP will increase a lot more than projected.
According to the BoP, “a fall of 5.9% in private consumption means a sharp increase in the savings rate from 7.1% to 12.8% (of family available income), a maximum since 2002”.
“This increase, apart from being an insurance against job uncertainty, resulted from involuntary savings linked to lockdown since there were no places open in which to spend disposable income.
For example, the BoP reveals that the “savings rate hit 18.8% in the second quarter of 2020 and, after a moderate fall in the second half of 2020, savings climbed again with the new lockdown at the start of 2021”.
The study also states that the “accumulated savings by these families during the pandemic in aggregate terms means a sold increase in wealth with the possibility of money being turned into property and other investments, for example.