Irish household deposits stood at stood at €144bn at the end of May, according to the Central Bank, which is around 30% higher than at the start of the pandemic.
It indicates that some Irish households have a significant buffer to help them to absorb recent price increases at a time when most are experiencing an erosion to their living standards due to inflation.
An economic letter from the Central Bank, which examines deposit growth throughout the pandemic, notes that if inflation is accompanied by lower economic growth in the near term, lower real income could reduce the existing deposit stock and constrain future savings capacity.
However, while Irish deposit growth has eased back to 2019 rates, some households with disposable income or experiencing a growth in real income may choose to continue to save for precautionary reasons, given current heightened economic uncertainty, the analysts conclude.
The letter points out that Irish household deposit levels increased sharply over 2020 and 2021.
The acceleration in growth peaked in February 2021 with an annual growth rate of 14%, which was more than three times the pre-pandemic average.
All euro-area countries recorded higher deposit growth relative to 2019, exceeding pre-pandemic averages, the letter notes.
Irish household deposit growth was among the highest in the euro area, exceeded only by Lithuania, Latvia, and Estonia.
However, each of these countries had already recorded relatively high rates of deposit growth pre-pandemic.
