French households built up as much as 120 billion euros ($146 billion) in excess savings in 2020 as lockdowns curtailed spending and government aid maintained incomes, according to the Bank of France.
When and how French consumers will spend the nest egg is key to determining the speed of the economic recovery after the pandemic. While there is no full lockdown in France, the prolonged closing of bars and restaurants and a nationwide curfew starting at 6 p.m. is keeping a lid on spending for now.
With hospitalizations rising, there is little chance of an imminent lifting of restrictions.
“It’s a question of confidence - that is what will transform savings into growth,” Bank of France Governor Francois Villeroy de Galhau said Monday evening on BFM Business television.
To estimate excess savings, the Bank of France compared actual savings in 2020 to the trend based on 2019 figures.
The central bank also said that while there was a 217 billion euro increase in gross debt levels of non-financial companies in 2020, their cash positions also rose by 200 billion, indicating most firms are only spending a fraction of the emergency state-guaranteed loans.