Excess savings as share of GDP during COVID-19 in selected countries 2020

During the initial outbreak of the coronavirus (COVID-19) and throughout 2020, many people around the world accumulated a considerable amount of savings. Recent estimates calculated the so-called excess savings to be as high as *** percent of GDP in the United States, amounting to approximately *** trillion U.S. dollars at the end of 2020. European countries also experienced a similar trend, with excess savings in Spain worth *** percent of the country’s GDP, and *** percent in Germany.

What are excess savings?

Excess savings can be defined as any additional amount of money that exceeds the expected value of savings during a specific period. It could sound like a paradox but, despite many people losing their jobs and businesses shutting down due to the consequences of the COVID-19 outbreak in 2020, widespread lockdowns and movement restrictions drove people to reduce spending and increase savings. In fact, the measure undertaken by governments to tackle the outbreak led to saving rates reaching unprecedented heights in many countries across the world, particularly in the wealthiest economies.

What to do with all the money?

It is hard to predict how consumption behavior will develop after the restrictions are lifted and life goes back to pre-pandemic normality. However, we know that those who were able to save more money are generally high-income individuals, as was observed in Canada, for instance. This could mean that their spending will not necessarily increase significantly. Also, the results of a survey conducted in the United Kingdom (UK) in March 2021, revealed that one in ten individuals was planning to spend the additional savings accumulated during 2020, while the vast majority was inclined to keep them in their bank accounts.