By international standards, Belgian households are relatively wealthy. However, some went into the Covid-19 health crisis with very little savings, meaning they struggled to cover expenses when their work hours were reduced.
While the financial situation of Belgian households improved throughout the course of the pandemic following an initial beating, a new report from the National Bank of Belgium (NBB) found that it had an uneven impact on households’ income, consumption and wealth.
"As in other euro area countries, households built up more financial assets than in the preceding year, in particular liquid assets. According to the Belgian financial accounts, the amounts on their sight deposits and savings accounts increased in 2020 more than in 2019 or in 2021," the report read.
However, households with very little savings were more vulnerable to wage shocks induced by the pandemic, especially if working in sectors and occupations affected by lockdowns (especially during the first year).
A survey carried out among households found that 15% of them had a saving buffer that would not even cover one month of current expenses, and around 30% were not able to cover at least three months of current expenditure costs.
Contrast between households
Vulnerable households included situations where one or both earners were self-employed, unemployed, with low qualifications or working in vulnerable sectors. These groupings were more likely to experience a drop in income during the pandemic.
From the outset, these often overlap with people with limited savings, and need to allocate a larger portion of their incomes to basic goods, such as food and clothing. "For these households, even a small loss of income could be detrimental and lead to difficulties in meeting their potential debt repayments," the report read.
Meanwhile, households that are more comfortable and are more likely to purchase non-essential goods (social and leisure activities, for example) – reduced their consumption level during the pandemic, which resulted in an accumulation of financial assets (mainly related to households saving at higher rates).
Absorbing shock
The NBB report highlighted that the support measures brought in by the government to cushion the economic blow of the pandemic made a difference by "protecting jobs, lessening the immediate impact of the pandemic and supporting the economic recovery."
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Workers who benefited from the temporary furlough scheme saw their income losses greatly mitigated (although there were still relatively large), while it also lowered their risk of becoming unemployed.
"In the absence of such a measure, the impact of the crisis and the increase in inequalities would have been more pronounced," the NBB report read.
However, it stressed that the unequal distribution of household savings made a difference, especially in the current context of high inflation where, once again, some Belgian households are better prepared in the face of this crisis than others.
