Irish households saved more than 4 times the average amount during the first quarter of 2021, according to a recent study by the Central Statistics Office (CSO). The CSO reports that Irish households saved more than €10 billion during the first three months of 2021.
This massive increase in savings was undoubtedly related to Covid-19 and it’s corresponding economic restrictions. Due to businesses being closed because of lockdowns, government unemployment benefits, or some combination of the two, incomes either held steady or increased, while spending was dramatically decreased. The CSO also reported that uncertainty about the pandemic and how long the lockdowns would last may have forced many Irish citizens to build up an increased amount of precautionary savings, in case money became tight in the future.
When looking at the numbers, it is no surprise that savings grew dramatically when compared to the first quarter of 2020. Compared to the first three months of last year, Government subsidies increased by €1.1 billion, and social protection payments rose by an even larger margin of €2.7 billion.
While the Pandemic Unemployment Payment temporarily decreased income for those receiving it, when compared to their income when working, it is important to note that wages for those able to work increased dramatically. Median incomes for those in work rose across the population, offsetting the decrease in income experienced by those receiving the Pandemic Unemployment Payment. For sectors that were particularly hot during the pandemic, such as finance, IT, and the public sector, the total wage bill across the country rose. In these sectors, the number of people employed actually increased, and so did wages.
However, taxes were raised in order to pay for the increased government subsidies provided to businesses and individuals during the past year and a half. Despite this increase in taxes and social contributions, overall gross disposable income still rose nationwide.
All of this combined to cause an increase in the household savings ratio. This metric was up to 31 percent, compared to 25.8 percent over the final quarter of 2020.
The people have used their increased savings in many ways. The largest proportion was added to deposits in Irish Banks, meaning that these funds will be available to use as restrictions ease and the economy opens. This will be beneficial to Irish businesses, as the pent up savings and demand brought on by the pandemic will both be released into the economy in the coming months. Some households also used their savings to pay off their debts, such as mortgages and other loans, while some deposited it in pension funds.