Households’ net financial assets surpass GDP in 2016

The ratio of household financial assets to GDP is well over levels in other countries of the Central and East European region.

Net financial savings reached 4.5% of GDP, or about 8% of disposable income last year, somewhat less than in previous years, and the authors of the MNB study - Anna Boldizsár and Zsuzsa Kékesi - forecast a further moderate drop to a still high level in the years ahead.

Households borrowed more than they repaid in 2016 for the first time since 2008, the study shows, and the authors forecast retail borrowing demand to prevail, fueled by increasing consumption and the revival of the home market. Gross savings also grew, they note.

Net savings rose to 5-6% of GDP as households shifted to become net loan repayers from net borrowers as retail lending sharply dropped after the 2008 crisis. Their net savings dropped practically to nil by 2007-2008 as household borrowing expanded and gross savings dropped in the previous few years.

Gross financial assets reached 126% of GDP and gross household debt stood at 24% of GDP at the end of last year.

Net financial assets or wealth of households rose by more than HUF 18 trillion from the middle of 2010, the study says, taking the ascent to power of the current government as a starting point. A graph in the study shows that the turnaround in net savings started already in 2009, when the ratio rose to 2% of GDP.

About 55% of the HUF 18 tln increase reflected retail transactions, indicating householdsʼ propensity to save, and 8% was related to government measures on retail FX loans such as a preferential early repayment scheme in 2012, compensation retail borrowers received from banks under the 2014 debt relief law, and the conversion of FX loans into forint loans in 2014. 

Nearly 30% of the increase in net household wealth since 2010 reflected revaluation effects and the remaining 8% was linked to other volume changes.

Changing savings portfolio

The household savingsʼ portfolio has changed considerably and, mainly due to a rise in government securities and investment fund share holdings since 2012, the value of securities held by households has been exceeding that of bank deposits since the second half of 2014. 

Households withdrew about HUF 1 tln from bank deposits in 2013 alone, parallel with an increase in cash and securities holdings. The authors note the low inflation and interest environment and the attractive yield and relative liquidity of government securities as motivations. (The Government Debt Management Agency (ÁKK) launched a campaign to attract retail investments in 2012-2013.)

Householdsʼ government securities holdings exceeded HUF 4.1 tln at the end of 2016, which is favorable in terms of financing the state domestically and limiting external vulnerability, the authors note. A roughly equal sum was held in investment fund shares, and about HUF 7.2 tln in bank deposits.