How Did CESEE Households Weather the Crisis? Evidence from the OeNB Euro Survey

During the financial and economic crisis the financial situation of CESEE households deteriorated significantly. Stagnating and in some countries falling disposable income forced households to adjust their consumption plans quite substantially, not least because social security systems in CESEE are still less advanced than in many Western European countries. Against this background this short study presents OeNB Euro Survey data in order to explore three issues. First, how did CESEE households weather the crisis? In order to shed some light on households’ strategies for cushioning the decline in disposable income, the 2013 fall wave of the OeNB Euro Survey included questions on households’ actual consumption smoothing behavior during the crisis period from 2008 to 2013. Second, due to the weak recovery in the main export markets of the CESEE countries, recovery decisively hinges on the pick-up of domestic demand, i.e. private investment and private consumption. The expected rebound of private consumption is partly related to households’ expectations regarding their financial situation and the national economy. Are recent macroeconomic forecasts warranted in light of the microeconomic evidence on the financial situation of CESEE households? Drawing from earlier work by Beckmann and Moder (2013) on the leading properties of household sentiment, the present short study discusses the improvement in household expectations regarding the national economy evident in the 2013 fall wave. We find that the macroeconomic forecasts of the European Commission, the wiiw and the OeNB are broadly in line with household economic sentiment. Finally, given that the crisis was preceded by a credit boom in some CESEE countries the assessment of households’ financial situation requires a closer look at household deleveraging. The legacy of the crisis might reduce households’ ability During the crisis period from 2008 to 2013 household disposable income deteriorated significantly in Central, Eastern and Southeastern Europe (CESEE), forcing households to adjust their consumption plans. Against this background, the present paper sheds some light on households’ consumption smoothing behavior based on microdata supplied by the OeNB Euro Survey for ten countries in CESEE. We find that households reacted to stagnating and in some countries falling income mostly by cutting back on everyday consumption and reducing or postponing large expenditures, while other households coped by reducing the amounts they were setting aside as savings or by drawing on existing savings, overdrawing their current accounts and increasing work hours. Moreover, we find that macroeconomic forecasts by the European Commission, the wiiw and the OeNB are broadly in line with economic sentiment among CESEE households. Finally, Euro Survey results revealed that not all households were able to borrow as much as they would have liked to and that the share of households planning to take out a loan fell between 2008 and 2013.