Household deposits surge by record €14.2bn in 2020 fuelling hopes for recovery this year

Restrictions imposed to curtail the spread of Covid-19 are thought to have contributed to households amassing almost €125bn in savings this year, up 12.8% on the previous year.

Household deposits increased by a record €14.2bn last year, fuelling hopes  there is a significant amount of money that could be unleashed to help the recovery from the Covid-19 crisis.      

The new figures from the Central Bank also showed that in December alone, household deposits increased by €950m, more than four times the €212m in deposits in December 2019.

The closure of much of retail and travel last year to curtail the spread of Covid-19 virus have led to households amassing almost €125bn, an increase of 12.8% on 2019. 

The year was also marked by a significant contraction in consumer borrowing, with repayments exceeding new drawdowns by €580m. 

Consumer lending declined over 2020 at an annual rate of 4.5%, compared to growth of 4% a year earlier.

The latest credit and debit card statistics from the Central Bank show consumer spending recovered substantially in December. Picture: Damian Coleman

This decline in borrowing would have been even more pronounced were it not for payment breaks introduced during the year, the Central Bank said. 

The annual growth rate in loans to households fell slightly. 

Separately, the latest credit and debit card statistics from the Central Bank show consumer spending recovered substantially in December.

A total of €7.8bn was spent using credit and debit cards in December, an increase of 21% over November.

This was largely driven by an increase in spending in the retail sector and in restaurants, where spending surged 66% following the easing of restrictions in early December. 

The Central Bank has published the first Quarterly Bulletin of 2021, forecasting that activity will remain weak in the first half of 2021. Assuming widespread vaccine deployment, recovery will begin in the second half of the year. https://t.co/bm4qYDzmp1 pic.twitter.com/6Hy7ZSOGir

— Central Bank of Ireland (@centralbank_ie) January 22, 2021

In its first quarterly bulletin of 2021 published last week, the Central Bank said the economic uncertainty about the speed and timing of the recovery and unemployment would likely mean that the level of so-called precautionary savings remains elevated this year. These restraints are expected to ease next year.

“The unwinding of the large stock of savings accumulated during the pandemic should support a strong recovery in consumption in 2022. 

"However, recovery may not be even across all sectors and there is the potential for more persistent effects from the pandemic in some sectors,” the Central Bank said.