People with savings accounts in Belgium actually losing money due to inflation

People with savings accounts in Belgium actually losing money due to inflation
For people saving in Belgium, more money will be lost than gained. Credit: Unsplash

People who are saving money via regulated savings accounts in Belgium lost more money in 2021 as a result of the increased consumer price index than in most Eurozone countries.

Between November 2020 and November 2021, the Eurostat harmonised index showed that consumer prices increased by an average of 7.1%, meaning the real interest rate on savings accounts was -7%, according to an analysis by economist Eric Dor of the IESEG School of Management (Lille Business School).

"With a sum of money that was saved a year ago and the interest it has produced, a Belgian saver can only buy 93% of what he could buy with that sum a year ago, and lost 7% of their purchasing power," Dor said in a statement to The Brussels Times.

The loss of "purchasing power" decreased at a higher rate in Belgium than in other eurozone countries for which data was published by the European Central Bank. Only in Estonia did the real interest rate decrease by more (-7.7%).

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The main reason behind this enlarged inflation in Belgium is the annual increase in average energy prices, which doubled (+55%) during this period, a much higher increase than in neighbouring countries.

He explained that the outstanding amount of regulated savings accounts in Belgium was €293 billion in November 2020, but as a result of this increased inflation, the loss of purchasing power for the savers in Belgium "is equivalent to what one could buy in November 2020 with €20.5 billion."

In other countries, the saving rates are far lower – around 0.50% (in France), or even 1.30% in Italy on deposit accounts with less than 3 months notice.

Record-low interest rates, sky-high inflation

At the start of this month, the combination of low-interest rates and an inflation rate of 5.6% saw record losses in purchasing power for people living in Belgium with regulated savings accounts; according to reports from De Standaard, there is no immediate sign of improvement.

The legal minimum return on regulated savings accounts is 0.11% in Belgium, Dor stressed, but there are few savings accounts that offer more. Moreover, this rate is affected by inflation, so if the inflation rate is higher than the interest rate, purchasing power is lost.

This has been the case for Belgium since 2015. However, the recent sky-high inflation rate and the record-low interest rates have resulted in real-time interest rates dropping to a record-low. Meanwhile, the inflation rate is not expected to drop until early in 2022, when it is predicted to average around 2.5%.

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