Irish households saving more than their European counterparts despite poor returns

Irish households grew their savings the most of all larger euro-zone economies in 2023 despite receiving relatively poor returns, according to German savings platform Raisin.

The group’s latest survey of saving patterns across Europe indicated consumers in the State put aside an additional €4.5 billion during the first 10 months of the year.

As a result, the stock of Irish savings grew by just over 3 per cent to €154 billion in contrast to an overall decrease (-0.6 per cent) in savings volumes for the euro zone as a whole.

Irish savings rates outperformed those of France (+0.9 per cent) and Germany (+0.3 per cent) with the Mediterranean countries of Italy (-5.3 per cent) and Spain (-2.6 per cent) recording decreases. The survey indicated Italians withdrew more than €68 billion in funds from their bank accounts over the first 10 months of 2023.

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It noted the stock of Irish savings held in term deposits with agreed maturities has more than doubled (+102 per cent). Of the €4.5 billion added in 2023, €2.8 billion is attributable to the growth in term deposits.

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“High inflation and some discontent in the broader Irish society about low ECB rate hike pass-through rates, have not demotivated Irish savers,” Raisin’s analysis concluded.

“Despite a general slowing of the savings rate, down from a high of 16.9 per cent in 2020, growth has not slowed as much as in other EU countries. Since the end of 2018, volumes have grown by over 47 per cent, underscoring a very healthy upswing,” it said.

With inflation predicted to continue to decline, Monica Pina Alzugaray of Raisin Bank said: “We are expecting a stable interest rate environment for the time being, but interest rates could start to drop a bit next year, especially if the European Central Bank (ECB) decides to adjust interest rates downwards.”

“The average of the three highest interest rates on two-year deposits currently sits at around 3.73 per cent – higher than projected inflation,” she said. “Over the next two years, savers can once again keep up with inflation and not lose value on their savings, if they decide to lock in their money now,” she said.

Recent Central Statistics Office (CSO) data show the Irish household savings rate fell from 11 per cent to 9.6 per cent (or €3.6 billion) in the third quarter of this year. This was the first time it had fallen below 10 per cent in three years.

Before the pandemic, households here saved on average 10 per cent of their disposable income, with consumer spending making up the other 90 per cent.

However, during the pandemic so-called lockdown savings soared as households here spent less on items such as transport, childcare, holidays and eating out. An additional €16 billion was placed on deposit in 2020.

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