The pandemic pushes household savings to the highest level since 1999

BarcelonaSince the National Statistics Institute (INE) collects information on the Spanish households's saving rate every quarter, the indicator has never been so high. The impact of the pandemic, the limitations to mobility and the months of lockdown caused the savings rate to soar to 14.8% in 2020, the highest figure since records began in 1999. In 2020 it exceeded 2019 levels by 8.5 points, as reported Wednesday by the statistical agency.

Thus, during the first year of pandemic Spanish households saved a total of €108,844m, more than double the €48,037m in 2019. In fact, this effect occurred despite the fact that disposable income fell by 3.3%, to €739,585m, and also to the fact that less was consumed than the previous year. Specifically, spending by Spaniards fell by 12% to €628,198m, throughout a year with many restrictions on leisure and tourism to contain the spread of covid-19.

If we look at the savings rate without taking into account the effects of calendar, this trend was relaxed throughout 2020. With the outbreak of the health emergency, in the second quarter the indicator jumped to 25.7%, while in the third quarter - with the arrival of summer and the end of lockdown - it fell to 12.5%. The year closed with a savings rate of Spanish households of 10.6%, only one tenth above the last quarter before the pandemic.

How much of this saving will go to consumption, an element with which it is closely related? "This year there has been a lot of forced savings," says Professor of Economics at the UPF José García Montalvo. He predicts, therefore, that this money can be channelled in two ways, depending on the approach of each consumer. "It will depend on whether this saving is assumed as part of wealth (and, for example, is invested in the stock market and does not count as an expense) or as a part of income which could not be spent during lockdown," says Garcia Montalvo.

This last hypothesis is the one that can help boost consumption, as the expert has observed in the case of the United States. "Of the first checks that Trump gave to citizens regardless of their income, a part remained invested but another was transformed into consumption very quickly," he explains. Even so, he admits that the Spanish case is different: the thousands of people who have been affected by furlough have gone on to earn less than before the pandemic and, therefore, have not been able to save.

In March inflation shot up to the highest level in two years, a figure that gave some optimism for the recovery of consumption. However, García Montalvo points out that there is also a danger that the upward pressure on prices could have adverse consequences, especially if it is not accompanied by a general improvement in the economy and the labour market: "If you don't know whether you will have a job tomorrow, the fear of what might happen will mean you won't touch your money".

The ability to finance falls

In addition to savings, the INE has also confirmed that during 2020 the financing capacity of the Spanish economy fell to levels of the last crisis, to €12,421m. The figure is equivalent to 1.1% of GDP and is the lowest since 2012. The concept of financing capacity is the difference between savings and investment; that is, it tells us whether a family or a company has enough money to finance, for example, the purchase of a flat or a business project.

In the case of households, where savings soared, the financing capacity also grew to €72,989m compared to €3,130m in 2019. In contrast, administrations dragged down the total, because they went on to need €123,072m last year. Companies - a good part have been forced to ask for ICO credits to avoid extinction - also saw how their financing capacity was reduced to €26,958m.