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March 2020 confinement has shot Portuguese savings to historic levels,reaching 13.4% of gross disposable income in early 2021 (INE, 2023). To findsimilar savings figures we need to go back to 1999. With consumption reduced toa bare minimum, the Portuguese were forced to save. Households reduced spendingmore because of a lack of alternatives to consumption than for any otherreason. The relationship between consumption, savings, and income has occupiedan important role in economic thought [(Keynes, 1936; 1937); (Friedman, 1957)].Traditionally, high levels of savings have been associated with benefits to theeconomy, since financing capacity is enhanced (Singh, 2010). However, theeffects here can be twofold. On the one hand, it seems that Portugal faced theso-called Savings Paradox (Keynes, 1936). If consumers decide to save aconsiderable part of their income, there will be less demand for the goodsproduced. Lower demand will lead to lower supply, production, income, and,paradoxically, fewer savings. On the other hand, after having accumulatedsavings at the peak of the pandemic, the Portuguese are now using them to carryout postponed consumption and, hopefully, to better resist the escalatinginflation. This study aims to examine Portuguese households' savings evolutionduring the most critical period of the pandemic, between March 2020 and April2022. The methodology analyses the correlation between savings, consumption,and GDP as well as GDP's decomposition into its various components andconcluded that these suddenly forced savings do not fit traditional economictheories of savings.

Portuguese Households Savings in Times of Pandemic: A Way to Better Resist the Escalating Inflation?