Dutch households to keep most pandemic savings

Dutch households will keep most of the extra savings they accumulated during the pandemic, a survey published by the Netherlands Bank finds.

In the first quarter of 2021, these pandemic savings stood at €46 billion ($54.1 billion), according to the DNB report, published today (August 26). The extra savings are mainly the result of the limited opportunities to spend caused by social distancing measures to counter Covid-19, the DNB says.

The study, carried out in June, says Dutch households intend to place 51% of these savings in bank accounts, 18% in real estate investment, They intend to spend 7% on debt repayment, another 7% on investment in financial products, and make donations with 5%. Households expect to spend only 14%.

“A possible explanation for this is that it is more difficult to make up for missed consumption of services than that of goods,” says the DNB.

Participants in the survey reported they intend to focus most of their extra consumption in consumer durables such as clothing, electronic devices and cars. “These are generally goods that are mainly imported from abroad and therefore do not contribute to economic activity in the Netherlands,” points out the central bank.

Despite these findings, the DNB forecasts “a strong recovery of household consumption in 2021”. This expectation largely rests on the assumption that contact-restricting measures cease to be necessary in the coming months, and consumers resume their pre-pandemic consumption patterns.

Pandemic boosted savings inequality

Unprecedented government stimulus measures preserved standards of living across all income levels. The uncertain scenario created by the pandemic also encouraged precautionary savings due to higher unemployment risk.

However, the survey finds that savings grew most in higher-income families. Overall, 38% of households say they saved more in 2020 than in the previous year. Nonetheless, this ratio is almost twice as high among households with net monthly incomes over €2,600 (46%), than among lower-income families (24%).

“This is likely because before the pandemic higher incomes spent a larger share of their income on services, such as hospitality services, which were temporarily unavailable due to the contact-restrictive measures,” says the DNB.

While 47% of employees were able to increase their savings, only 21% of the self-employed could do so.

The survey shows the limits of the government support to prevent higher inequality. One in seven Dutch households saved less in 2020 than the year before. “This is particularly true for households working in a sector hard hit by the crisis (hospitality industry, transport and culture & recreation),” says the survey. “In this group, one in four saved less than in 2019.”