National saving increases by Nu 19 billion

National saving increases by Nu 19 billion

SAM Staff,
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From a negative growth of 16.02 percent in 2015, the country’s gross national saving saw a growth of 65.64 percent in 2016, an increase of almost 82 percentage points.

In absolute terms, gross national saving increased to Nu 47.13B in 2016 compared with Nu 27.85B in 2015. Of the total national saving, government saving constituted Nu 4.10B. Private savings (Households, Private and Public Corporations) constituted Nu 43.02B.

This was attributed to drop in the final consumption expenditure by 1.09 percent and favourable net inflow of primary income and transfers from abroad.

Gross national saving is derived by deducting final consumption expenditure from gross national disposable income, which consists of savings from individual, businesses, and the government.

Although there is huge growth in national saving, it fell short to finance the required investment demand in the economy.

The economy in 2016 recorded an investment of Nu 81.81B compared with Nu 71.28B in 2015. The Saving-Investment (SI) ratio of the economy was recorded at 0.58 in 2016, an increase from 0.39 in 2015.

Ideally, if the ratio is 1:1, the entire saving of the country can finance all investment needs of the economy.

For instance, if a family earns Nu 100 extra, it adds to his disposable income and the family is likely to save that amount in a bank. The bank in turn will have more money to lend. This money will then be used for some form of economic activities, which will drive production of goods and services.

The national saving also helps the economic growth as GDP is a measure of production, income, and expenditure. It broadly determines how much a country can produce, generate income, consume, and save.

However, the drop in final consumption expenditure (FCE) also contributed to the huge growth in national savings. Even with the drop, the FCE in nominal terms was recorded at Nu 100.73B, which is almost 68 percent of the GDP.

Household final consumption expenditure, which measures household’s expenditure on purchases of products for their everyday needs like food, clothing, cars, rents, personal services, rents, among other, accounted for 75.12 percent of the FCE last year. This also witnessed a negative growth of 2.60 percent against the growth of 9.94 percent in 2015. Household expenditure was estimated at Nu 75.7B, which is about 51 percent of the GDP.

Similarly, government Final Consumption Expenditure accounted for 24.88 percent of the total FCE, constituting Nu 25.06B. Government expenditure slowed from a growth of 10.80 percent in 2015 to 4.21 percent in 2016, mainly due to reduction in expenditure on maintenance of property, equipment, and other operating expenses of the government.

Government final consumption expenditure represents government expenditure on goods and services that are used for the direct satisfaction of individual or collective needs of the community or the nation.

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SOURCEKuensel
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