Eurostat figures released in November show Latvians are among the countries in the European Union that save the least money, with an average of 3.48% of their disposable income being saved. The bottom four countries in the bloc were: Croatia, Slovakia, Lithuania, Latvia, Estonia, Poland and Greece.
In 2022, the EU saved an average of 12.7% of their disposable income, a decrease from 16.4% in 2021 and closer to pre-COVID-19 values. The highest gross saving rates were recorded in Germany, the Netherlands, and Luxembourg. 12 EU members recorded saving rates below 10.0%, with Poland and Greece having negative rates. Real gross household adjusted disposable income per inhabitant in the EU decreased by 0.8% in 2022, the first decline since 2013.
Net wages and gross operating surplus and mixed income accounted for 73.6% of disposable income in Denmark, 72.1% in Ireland, 66.9% in Latvia, and 66.2% in Estonia. The Covid-19 intervention has shaken Latvians’ steadily increasing savings habit, with the largest overall increase in household saving rate between 2012 and 2019, but a 5.0 pp decrease in 2019-2022.
A nation faces economic challenges when its citizens have minimal personal savings. Firstly, it limits individual financial resilience, making citizens vulnerable to unexpected expenses like medical emergencies or job losses. This, in turn, can strain social safety nets and public resources as the government may need to step in to support those in financial distress.
Secondly, low personal savings hinder capital formation. When citizens don’t save, there’s less money available for investment in banks or financial markets. Insufficient capital impedes economic growth, hindering the country’s ability to invest in infrastructure, innovation, and other critical sectors.
Moreover, low personal savings affect retirement preparedness. If citizens haven’t saved enough for retirement, they become reliant on public pension systems, straining government finances. This demographic challenge is exacerbated as populations age, requiring more comprehensive and costly social security measures.
It is in the best interest of all countries of Central Eastern Europe to catch up as quickly as possible with the West, especially as decades of low birthrates will make it increasingly unlikely that elderly people will be financially supported by their children when they grow old.
