Czechs Hoarding Money: Where Will They Spend It?
- Czech households continue to exhibit a high savings rate, currently at 19% of net income-a level not seen since the height of the COVID-19 pandemic.
- In 2019, Czech households saved an average of 12 percent of their net income.
- Petr Dufek, chief economist at Creditas bank and a member of the Czech Banking Association's forecasting panel, notes that people "are still on our guard."
“`html
Czech Household Savings Remain High, mirroring Pandemic Levels
Table of Contents
Czech households continue to exhibit a high savings rate, currently at 19% of net income-a level not seen since the height of the COVID-19 pandemic. This trend is driven by concerns about future economic stability, particularly regarding pensions and housing, alongside recent real income growth.
Savings Rate Surges to Pandemic-Era Levels
In 2019, Czech households saved an average of 12 percent of their net income. Though,this figure has risen to 19 percent,matching the levels observed during the coronavirus pandemic according to Česká novinová agentura. This sustained high savings rate suggests a continued sense of economic uncertainty among Czech citizens.
Petr Dufek, chief economist at Creditas bank and a member of the Czech Banking Association’s forecasting panel, notes that people “are still on our guard.”
Motivations Behind the Savings Trend
Dufek believes that concerns about the long-term viability of the pension system are a critically important driver of increased savings for retirement, stating, “Which is good news.” He also suggests that saving for housing is another key motivator. Though, a ample portion of the population still does not actively save.
Data from the czech National Bank confirms this trend, revealing an increase of 167 billion Czech crowns in household deposits over the past year as reported by the Czech National Bank.
Deferred Consumption and Uninvested Funds
Despite the increase in savings, Dufek points out that the anticipated surge in spending from accumulated pandemic-era savings has not materialized. “The realization of deferred savings has never taken place here,” he explains. “We keep all the money we saved during covid in our bank accounts and we definitely don’t spend it suddenly.”
During the initial phase of the pandemic, from March 2020 to the end of 2021, Czech deposits in banks swelled by 432 billion crowns.
Real Income Growth as a Contributing Factor
Analyst petr Bartoň highlights the role of rising real incomes in sustaining higher savings rates.He notes that real incomes have been growing for nearly two years.
Bartoň clarifies a common misconception regarding wage recovery,stating,”Before the elections,some politicians argued that our real wages,after taking inflation into account,have still not reached the pre-Covid level. But this applies to gross wages, before taxation.”
savings Rate Trends: A Data Overview
| Year | Household Savings Rate (%) |
|---|---|
| 2019 | 12 |
| 2020-2021 (Pandemic Peak) | 19 |
| Current | 19 |