Irish households were saving more of their monthly disposable income than any other eurozone country at the height of the Covid-19 shock in 2020, Central Bank data shows.
The state’s household savings rate peaked at 25% in 2020, a multiple of the 10% average rate posted in the previous three years, researchers at the bank said in an economic note released Wednesday.
At the end of May this year Irish household deposits stood at 144 billion euros, almost 30% more than at the start of the pandemic, the note said.
Report authors Simone Saupe and Maria Woods, however, said Ireland’s household savings rate, which had fallen to 19% in the first three months of this year after peaking at 33% in the second quarter of 2020 , and the stock of deposits could decline in the short term, as real household income is eroded by the soaring cost of living.
Still, they said the current economic uncertainty, amid war in Ukraine, soaring inflation, could lead households who can afford it to increase their precautionary savings.
However, they warned that in the longer term, a rise in Ireland’s old-age dependency ratio could reduce people’s ability to save.
The Economic and Social Research Institute (ESRI) warned last month that Irish households were facing the biggest drop in living standards since the 2008 financial crisis, with labor income failing to keep pace with the surge in inflation. The institute also predicts a possible slowdown in the growth of real estate prices due to rising interest rates.
With inflation expected to exceed 7% on average this year and incomes only expected to rise by 3.5%, real incomes would contract by up to 4%, according to ESRI, which represents the largest drop in the world. standard of living since the period 2008-2009. when the economy imploded in the face of a global credit crisis.
Still, the institute said the Irish economy continues to perform well and will grow at a rate of 6.8% in terms of gross domestic product (GDP) this year and 4.8% in 2023 thanks to the strong exports from the multinational sector. .