Irish household savings amount to almost € 10 billion

Irish households have saved nearly € 10 billion in the first seven months of this year, which, according to Ibec, may represent a significant economic stimulus opportunity for the government ahead of the 2021 budget.

The business lobby group has also forecast that the Irish Gross Domestic Product (GDP) will fall 2.6% in 2020 as a result of the pandemic-related economic crisis, as evidenced by recent data, showing that domestic demand fell. one fifth in the second trimester. while exports proved to be stronger than anywhere else in the EU.

In its quarterly economic outlook released this morning, Ibec said that an “inability to spend” meant that households saved € 9.8 billion in the first seven months of 2020, keeping € 20 billion more in Irish banks than they owe. in debt.

The lobby group says these resources and the current strength of the country’s exports and public investment are the key difference between this recession and the last one in 2008.

“In recent years, we have drawn attention to the leverage pattern of Irish households at a rapid pace after the financial crisis. This, in part, was driven by economic scars and debt aversion, but also by unaffordable prices for common assets like housing, ”the report says.

“This saving behavior has been turbocharged by Covid. In the first seven months of 2020, households saved € 9.8 billion. This is 5.5 billion euros more than in 2019 and 7.3 billion euros more than during the corresponding period in 2018. “

These Covid savings can represent “a great stimulus opportunity” if the government can encourage households to spend or invest with confidence, Ibec says.

The group says Ireland is currently experiencing a K-shaped recovery, with a growing gap between businesses and households whose economic prospects have proven resilient during the pandemic and those facing a significant decline in income and opportunity.

The lobby group warned that the growing risk of a no-deal Brexit may also exacerbate this gap between sectors, businesses and households.

Figures released by the Finance Department on Friday revealed that the government posted a deficit of 9.4 billion euros during the first three quarters of the year, but that tax revenues have remained strong.

The figures were released less than two weeks before the next budget, which according to Finance Minister Paschal Donohoe will be based on the assumption of a no-deal Brexit.

Public Spending Minister Michael McGrath said on Friday that the government was anticipating that “a significant portion” of this year’s Covid-19-related spending would be incurred again next year.

Donohoe echoed this, saying that “what’s very different” about next year’s finances is that the government will have to plan for this year’s one-off spending to “see through” until next.

“Can I give you an impact on what that will mean for our deficit next year? Right now, I honestly can’t, ”Donohoe said.

Ibec said that the key to the 2021 Budget is not a challenge for a society with very few resources, it is a challenge to find the right channels for those resources to move and people to go back to work.

Ibec chief economist Gerard Brady said the budget should make the government continue to make the right decisions, by introducing specific measures to protect the most affected sectors and workers from the twin threats of Covid and Brexit.