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ING Bank economist: We estimate 5.5% economic drop this year for Romania
Valentin Tataru, an economist at ING Bank Romania estimates an economic drop of 5.5% this year for Romania, but expects at the same time an increase of the consumers' inclination toward savings.
“The exceptional impact of the crisis generated by Covid 19 pandemic will have complex effects in economy, both on a short run – through the economic contraction we estimate at -5.5% in 2020- and on a long and medium run, by changing the consumers' behavior under the impact of the epidemiological evolution and the measures to fight it. In this respect, we expect an increase of the tendency to save, in line with the latest figures on the evolution of the people's deposits which reached new historic highs in May (15.2% more than in the same period of 2019). Considering the Romanians' lower general capacity to save (35% of households declaring they have no savings) and rhe immediate perspective to interrupt the increase rate of incomes, a part of additional economies may be the result of a more prudent consumption behavior,” said Valentin Tataru, ING Bank Romania, in a press release.
According to the latest international ING study, made in May 2020, the impact of Covid 19 pandemic and the restrictive measures imposed was also felt in the financial behavior of Europeans about the management of expenses and saving customs.
At European level, 44% of respondents say they spent less and 30% say they saved more during the isolation regime.
Some of them have limited their expenses as a result of lower incomes, while others saved money without realizing every weekend, because they did not have the possibility to carry out their daily activities. For others, saving represented a conscious decision to face the uncertainty produced by Covid 19 pandemic.
“About 46% of Romanians say they spent less money during the isolation period, over the European average of 44%, while the first places in the top were occupied by Luxembourg and Italy (55% each), and the British (51%). Also, 31% of Romanians say they saved ore, a little over the European average of 30%,” the bank shows.
People from Luxembourg declare that they saved more (41%), followed by the Turks (35%) and at the opposite pole we find the Czechs (18%) and Austrians (23%).
“Customers of ING Bank Romania were visibly more preoccupied to save after the beginning of the emergency state. Thus, savings accounts opened online were rising, especially after the launch of the option Round Up (on April 11), which allows customer to save in a more simple way. More exactly, between April 27 and May 4, the increase was of 365% against the same period of 2019. In the first 5 weeks since the launch, 50,000 customers activated and used Round Up. At the same time, the new service had the highest adoption rate in Romania of all countries from the ING group, illustrating the Romanians' interest in digital solutions and in saving,” the bank says.
In May 2020, 35% of Romanians declared they had no savings, but the share decreased by 4%, compared to 39% in December 2019. However, Romanians are still last when it comes to savings.
About 76% of Romanians declare they would feel better if they had more savings (on the rise by 5% compared to December 2019), compared to the European average of 68%, being surpassed only by the Poles (82%) and Czechs (78%).
At European level, people from Luxembourg have highest savings (92%), followed by the Dutch (80%) and Czechs (79%). On the average, 26% of European respondents declared they had no savings, on the drop from 28%.
Although the study shows a certain tendency towards savings, the number of European with no savings at all remained stable -26% in May 2020, compared to 28% in December 2019. In 8 years, the share fluctuated constantly between 25% and 35%. Families with relatively stable financial position tend to save more, while groups which were already in a state of financial vulnerability save less, but this discrepancy can be seen better in this period of time.
Of respondents who saved money, only 9% have the equivalent of a salary, while 24% of them saved abut 1-3 salaries. Only 17% of Europeans say they saved over 12 salaries. The highest share about a healthy attitude toward saving is recorded in the over 65 category, represented by pensioners who live alone.
“One of the basic recommendations about financial security is gathering an emergency fund, at least 3-6 salaries, to cope with unforeseen events, the lack of savings showing a state of financial vulnerability. Savings are defined as funds which can be easily accessed, so the study did not take into account long term savings, such as pension funds or life insurances,” the bank points out.
Two online studies were made by Ipsos for this report: over November 27 – December 16, 2019 and May 15-May 27 2020. About 26,000 respondents participates in these studies.
The international ING study is made several times a year by ING eZonomics. The topics approached are about money and life style – they combine ideas about financial education, personal finances and economic behavior to supply practical information regularly.