  March 2020 confinement has shot Portuguese savings to historic levels,
reaching 13.4% of gross disposable income in early 2021 (INE, 2023). To find
similar savings figures we need to go back to 1999. With consumption reduced to
a bare minimum, the Portuguese were forced to save. Households reduced spending
more because of a lack of alternatives to consumption than for any other
reason. The relationship between consumption, savings, and income has occupied
an important role in economic thought [(Keynes, 1936; 1937); (Friedman, 1957)].
Traditionally, high levels of savings have been associated with benefits to the
economy, since financing capacity is enhanced (Singh, 2010). However, the
effects here can be twofold. On the one hand, it seems that Portugal faced the
so-called Savings Paradox (Keynes, 1936). If consumers decide to save a
considerable part of their income, there will be less demand for the goods
produced. Lower demand will lead to lower supply, production, income, and,
paradoxically, fewer savings. On the other hand, after having accumulated
savings at the peak of the pandemic, the Portuguese are now using them to carry
out postponed consumption and, hopefully, to better resist the escalating
inflation. This study aims to examine Portuguese households' savings evolution
during the most critical period of the pandemic, between March 2020 and April
2022. The methodology analyses the correlation between savings, consumption,
and GDP as well as GDP's decomposition into its various components and
concluded that these suddenly forced savings do not fit traditional economic
theories of savings.
