Household saving situation Evidence from the consumer ...ec.europa.eu/info/sites/info/files/al_boa_presentation_household_saving...Source: Albanian consumer survey data and author’s

Household saving situation Evidence from the consumer survey

according to household income in Albania

Iris Metani

Bank of Albania

EU WORKSHOP ON BUSINESS AND CONSUMER SURVEYS

BRUSSELS, 15 – 16 November 2018

Outline

Motivation and contribution of the material

Some theoretical considerations

The approach

A short overview of consumer survey in Albania

The descriptive evidence

Concluding remarks

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Motivation and contribution of the material

Fundamental to understand aspects of the Albanian household financial

and saving situation, as well as their motives.

The precautionary motive to save is of a particular importance.

The survey approach advantage.

A first exploration of disaggregated consumer survey indicators per

income quartiles since the conduct under the EC programme.

It examines the data to check for evidence on the precautionary saving

behaviour in Albania and how it varies for different income groups.

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Some theoretical considerations

The precautionary motive to save – among several savings motivesKeynes (1936), Katona (1960)

A form of building up reserves against unforeseen contingencies

Keynes (1936),...mirrors primarily concerns about future risks Katona (1960)

The motive for precautionary saving is shaped by (Lugilde et al. (2017)):

Characteristics of individuals;

The environment;

Uncertainty on future income.

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The approach

The investigation on precautionary saving in Albania, based on the question

combination presented by Friz in the 8th Joint EC/OECD Workshop

(2017), using consumer survey data.

The focus on 3 questions: Q11 (savings expectations);

Q2 (expected household financial situation);

Q9 (expectations on spending in major purchases).

The interpretation: If a considerable share of consumers expecting their financial position to get worse, are also

expecting to save money, this can be a signal they want to save for precautionary

reasons.

An additional signal that savings are done for precautionary reasons would be that

households expect also to spend less on major purchases.

2 indicators to complete the analysis: Household financial distress indicator (following Malgarini and Margani, EC/OECD Workshop (2009)).

Consumer uncertainty indicator (following Ivanov (2018) based on Girardi and Reuter (2017)).

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A short overview of consumer survey in Albania

Consumer confidence survey quarterly since 2003 (Bank of Albania, in cooperation with

INSTAT and assistance of Ifo).

Organisation of surveys under EC programme for the Harmonization of Consumer and

Business Confidence Surveys for member and candidate countries of EU since May 2016.

Sample frame – Population and Housing Census, 2011;

Sample size – Consumers (1200);

Frame list update – Every year;

Sampling method – Panel based on stratified random sampling;

The stratification criteria: Geography and Population size/density;

Weighting scheme: weights based on the probability of selection to ensure the sample

reflects the population and to count for unit non-responses (updated monthly).

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Income quartiles in the context of Albanian consumer survey75% of the households fall under Q2 and Q3 quartiles in 2016:M5 – 2018:M10

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Source: Albanian consumer survey data and author’s calculations.


Consumer Confidence Indicator (CCI) by income quartilesLower income groups generally less optimistic than their respective counterparts

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Household financial situation by income quartilesseems to ameliorate with higher levels of income

9



Household financial distress indicator by income quartilesresults higher for the poorest group

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The two components of the financial distress indicatorThe component related to debt is relatively higher than the other and is

larger for households in the first quartile

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Saving at present for the population appears to have a

positive correlation with uncertainty (around 0.5)Signals that the precautionary motive is present among the Albanian consumers

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Saving at present has a relatively higher correlation with uncertainty

indicators for Q3 and Q2 (respectively 0.3 and 0.2)The low correlation might suggest that the strength of precautionary motive might be weak

13Source: Albanian consumer survey data and author’s calculations.


The upper income quartile exhibits higher saving expectations

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Among the consumers who expect to save over the next 12 months (22% of all respondents), the majority of them fall in Q3 and Q4

In %

2016:M5 – 2018:M10

Increase in

savings

Decrease in

savingsDon’t know

Share of respondents by

quartile

First Quartile 2 21 11 17

Second Quartile 13 43 32 36

Third Quartile 58 33 46 39

Fourth Quartile 27 2 10 8

Total 100 100 100 100

Share of respondents

by question answers22 74 3 100

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In %

2016:M5 – 2018:M10

Increase in

savings

Decrease in

savingsDon’t know Total







14% of respondents expect a worsening in the household financial situation over the next 12 months, and the majority of them falls in Q2 and Q1

In %

2016:M5 – 2018:M10

Respondents who expect

a better financial

situation


a worse financial

situation


no changes in their

financial situation

Don’t know





Total 100 100 100 100


question answers30 14 53 4

16

In %

2016:M5 – 2018:M10


a better financial

situation


a worse financial

situation


no changes in their

financial situation

Don’t know







On average the share of savings for precautionary reasons by Albanian consumers is lowThis share is mostly concentrated among consumers that fall in the Q3 and Q2

In %

2016:M5 – 2018:M10

Worsening of the

financial situation and

increase in savings

Worsening of the


decrease in savings

Worsening of the

financial situation

and don’t know

Share of

respondents by

quartile





Total 100 100 100 100


question answers2 96 2 100

17

In %

2016:M5 – 2018:M10

Worsening of the


increase in savings

Worsening of the


decrease in savings

Worsening of the

financial situation

and don’t know

Total







On average 50.4% of consumers who expect to save inview of a worsening of their expected household financialsituation, expect to spend less money on major purchases.

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The share of savings for precautionary reasons in Albaniaresults relatively higher for the upper quartile of incomeIt could exist a positive income effect on saving for unexpected events

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Concluding remarks

Consumers hold different opinions regarding sentiment, their financial

and saving situation depending on their income.

Gaps among income quartiles remain constant over the period under

consideration.

The share of savings done for precautionary reasons in Albania seems to

be low.

Differences emerge by income quartiles. Most of precautionary saving is

generated by the highest income quartile.

A first exploration of the data at a micro dimension and by subgroups of

the population.

Results remain descriptive, are based on non – seasonally adjusted data

and should be treated as provisional.

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Thank you for your attention!

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Household saving situation Evidence from the consumer ...ec.europa.eu/info/sites/info/files/al_boa_presentation_household_saving...Source: Albanian consumer survey data and author’s