On the Finnish saving (deposit) accounts will be a record 100 billion euros by the end of the summer 2020, says Hypo's chief economist Juhana Brotherus. (Remark: "Hypo" is the credit institution in Finland that specializes in housing, and that provide a full range of home financing services.)
Some of the Finnish people have become unintentionally prosperous during the corona epidemic. By the end of the summer, the household deposit (saving) accounts are predicted to accumulate a record 100 billion euros. The growth has been very rapid through the crisis and exceeds the growth rate of household loans.
According to Hypo's chief economist Juhana Brotherus, a large part of the money accumulated during corona pandemic belongs to the so-called savings buffers. In the situation of uncertain future, the households are preparing for a situation where expenditures will remain unchanged but income flows decrease. This is also a typical phenomenon in companies as well. If the economic and employment situation appears to be generally unstable, money will be saved on safe destinations. Traditional savings account can therefore be considered as the first and absolute safe option.
Under present conditions, Juhana Brotherus considers savings accounts to be a reasonable investment. Especially in the face of the threat of temporary layoffs, small savings, according to the chief economist, should not be invested in more uncertain items such as stocks.
The economic outlook for some households participating in the austerity measures has not been shaken by the pandemic. The savings have been accumulated in the account due to the reduced consumption opportunities during the crisis.
- For example, employment in the health care sector is on a more stable situation than before the coronavirus crisis. For them, it can be said that putting money in an account is not necessarily a sensible investment policy. If we are talking about longer-term savings, it would be worthwhile to look at slightly higher-yielding items such as stocks and interest rates.
Petteri Vaarnanen, Director of Asset Management at the Savings Bank Group, follows the same lines.
- In the case of an extra money, shares are still our most popular type of asset, in which we recommend to put savings. Stocks still have upside potential, and interest rates will remain very moderate in the long run.
According to Juhana Brotherus, in the stock market, coronavirus has not led to a mass flight of small investors, contrary to previous fears. Companies, on the other hand, have only invested in mandatory items.
At the moment, investors are looking at the United States, which has been shaken by a sharp spike in infection. In Europe, Britain and Sweden, which have cope with epidemic less effective than other countries, are a cause for concern.
Petteri Vaarnanen reminds that easing the corona crisis will not eliminate other storm clouds accumulated over the economy. In the autumn, the market may be shaken by, among other things, the United States presidential election and the Brexit that came to a standstill during the corona period.
According to Juhana Brotherus, the savings that have swelled in post-epidemic Finland can, in any case, be channeled into a significant stimulus for economic recovery. People have unused funds in their saving accounts, which can be taken into consumption very quickly when services open. Here, of course, it should be taken into account how much courage and opportunity there is to invest at this point.
- The savings will certainly be reflected in a revival in private consumption. I believe household confidence will remain strong as the housing market is well stocked and interest rates are low. Energy prices have remained even historically low. These are all factors that support the purchasing power of households, says Petteri Vaarnanen.
The full information and the source text can be found at Ilta-Sanomat website.
Published 24.07.2020, FINREPO