High inflation with relatively low interest rates on savings will again lead to a massive fall in Austrians’ real wealth this year – the situation should improve only marginally.
Interest rates have been at a low point for about ten years, so there is nothing to earn on savings accounts, and the relevant 3-month Euribor (chart) was even negative for years. Because almost everything became more expensive, people could pay less with their money – purchasing power fell.
Only 0.38 percent interest on savings account
This had a huge impact, especially in 2022. Inflation shot up to 8.6%. According to the OeNB, interest on savings accounts averaged only 0.38%. The bottom line was about 8% minus. With Austrians’ financial assets (cash, savings accounts, etc.) of about €300 billion, this means a real value loss of €24 billion in 2022.
The situation is likely to improve only marginally this year. The experts at Raiffeisen Capital Management (RCM) expect a fall in value of 6% this year due to persistently high inflation and slightly better interest rates – that’s a whopping € 18 billion.
Savings can soon generate income again
The RCM therefore once again emphasizes the importance of investments outside the savings account (for example, funds). “For an iron reserve, saving still makes sense,” adds Franz Rudorfer, spokesman for the banking department in the WKO. Many customers would also use the conditions via fixed terms, which have now been increased again. The best offers can be found atbankenrechner.at. As the ECB (and hence the banks) will continue to rise, it may be worth waiting or making a shorter commitment.
If, as hoped, inflation falls in 2024/2025, traditional savings could even return real income (see green area on the right of the chart). This was last the case before 2010.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
