While the financial wealth of the Belgian household sector is high by international standards, some households went into the COVID-19 crisis with very limited savings. Survey data show that 15 % of households did not even have enough savings to cover one month of current expenses at the start of the pandemic. These households were more vulnerable to shocks affecting their labour incomes.

At the aggregate level, the financial situation of Belgian households actually improved during the COVID-19 crisis. A decline in consumption opportunities and an uncertain environment combined with policy support measures resulted in an increase in aggregate savings.

But this global picture masks the heterogeneity among households: the pandemic and resultant economic crisis had an uneven impact on households’ income, consumption and wealth. Some sectors and occupations were more severely affected by economic restrictions imposed to curb the spread of coronavirus. The self-employed, unemployed, less-skilled or people working in vulnerable sectors were more likely to experience a drop in income in that period. Some of these households also had a limited savings buffer before the pandemic and were allocating a larger proportion of their incomes to basic consumer goods. For these households, a drop in income combined with limited options to reduce consumer spending led to a contraction in their financial wealth. In contrast, households in a more comfortable position were more likely to scale back their consumption during the crisis, which resulted in an accumulation of financial assets.

How successful were policy support measures designed to cushion the impact of the shock for the most vulnerable households? Our analysis suggests that the furlough scheme protected jobs, lessened the immediate impact of the pandemic and supported the economic recovery. Furloughed workers benefited the most from this scheme. Their income losses – although still relatively large – were mitigated by temporary unemployment benefits and lower unemployment risks. The furlough scheme also had an indirect positive impact on all households. In the absence of such a measure, the impact of the crisis and the increase in inequalities would have been more pronounced.

Nevertheless, the distribution of the accumulated savings across households matters, especially in the current context of a rapid acceleration of consumer price inflation. Belgian households, particularly those that had incurred income and wealth losses during the pandemic, have been left exposed to the sharp increase in the cost of living, fuelled by rising energy prices, which may put a further strain on their finances and possibly on debt repayments, too.