Original article (in Slovenian) was published on 08/11/2021
The household savings rate increased last year in 25 European countries surveyed as a result of the pandemic according to data from Slovenia’s Statistical Office.
Žana Erznožnik, Razkrinkavanje.si
On 26 October, at the 85th extraordinary session of the Slovenian National Assembly, a Slovenian Democratic Party (SDS) member of parliament Jure Ferjan stated that at the end of last year household net worth in Slovenia was at its highest in history. Compared with 2019, it increased by 5.2 billion euro, he said, »this is concrete data that speaks volumes about the work of the government.«
In his address to parliament, he referred to data by the national Statistical Office (SURS), which published a report on household savings in Slovenia and Europe on the day of the session.
SURS obtained data on net wealth of Slovenian households, i. e. the value of financial assets (such as cash and shares) minus the value of outstanding liabilities (such as bank loans), from the database of the Bank of Slovenia.
Last year, household net wealth amounted to 48.2 billion, the highest in two decades since the Bank of Slovenia began collecting this data. But net household wealth has continuously been increasing since 2001, except in 2008 and 2011 when it had decreased.
Last year, total household wealth increased by 5.2 billion euro compared to 2019, as MP Ferjan said at the parliamentary session. However, SURS included the assets of non-profit organizations providing services to households, such as trade unions, sports clubs and charities, in that total. Although, they explained, the impact of their wealth on the total is negligible.
Slovenia is no exception in terms of household financial flows. According to SURS which based its findings on Eurostat’s data, last year household consumption decreased in all European countries surveyed, except in Slovakia. And the gross household savings rate rose in all countries.
Compared to 2019, the savings rates increased the most in Luxembourg (by 9.5 percentage points) and Slovenia (8.9 points), and the least in Hungary (0.3 points) and Slovakia (0.8 points).
Household wealth impacted by autonomous choices
Bogomir Kovač, professor at the School of Economics and Business in Ljubljana, told Razkrinkavanje.si that household wealth increased due to savings motivated by the pandemic as consumers could not and also did not want to spend during the emergency. »People prefer to save in crisis situations because they are afraid that times could get even worse.«
In his view, significant accumulation of savings by consumers poses a problem and the state should help in lieu of individuals. The government also increased subsidies during the pandemic, including to households, thereby contributing to the rise in total household wealth. He added that the decision to save money is an autonomous decision made by households in crisis situations.
The government Institute of Macroeconomic Analysis and Development explained to Razkrinkavanje.si that last year’s substantial rise in total household wealth »was largely a response to the pandemic and was therefore linked to exceptional circumstances, which is why it would be difficult to speak of an improvement in overall prosperity«.
Household wealth increased, among other things, as a result of involuntary saving asconsumers were forced to cut back on spending due to closure of various shops and businesses, as well as precautionary saving due to increased uncertainty about future epidemiological and economic conditions, the Institute added.
As to the effect that this may have on the economy, the Institute explained that gross domestic product is boosted by higher consumption and investments of households.
Kovač, meanwhile, pointed out that the rise in household wealth will result in increased demand, which will in turn lead to higher sales and production, and consequently to corresponding economic growth and higher employment. However, if increased demand collides with limited supply, it could lead to inflation, he stressed.
The SDS’s parliamentary group did not respond to questions about our findings. We will publish their response when we receive it.
The claim by SDS’ MP Jure Ferjan that last year Slovenian household net worth had increased by 5.2 billion euro compared to 2019 which was a record high is accurate. However, household wealth has been growing for two decades, except two years when the trend was negative. Additionally, the record household net was not a direct consequence of the government’s measures. In his interpretation, Ferjan omitted other factors, such as the pandemic, which, according to assessments of experts, had a significant impact on the savings rate and, consequently, on household wealth.
The statement is untrue.