When we talk about the top savers among countries, we are really talking about which countries have the highest savings rates. These are not necessarily the nations with the highest incomes. For example, a country where the average person makes $10,000 and saves $2,000 would have a 20% savings rate. Another country where people save $20,000 per year out of $100,000 in income would also have a 20% savings rate.
Furthermore, there are also different ways to save. People can save directly, businesses might save, and government agencies may also save. The national savings rate incorporates all of these different types of savings. As a practical matter, this article uses World Bank data on gross domestic savings rates and average incomes from 2018 and 2019.
A wide variety of countries have high savings rates, and their reasons for saving are as diverse as the countries themselves. The list of top savers also changes considerably over time.
- The top ten countries by savings rate were Macao, the Republic of the Congo, Qatar, Ireland, Brunei, Singapore, Luxembourg, Gabon, the UAE, and China.
- There is a connection between economic growth, incomes, and savings rates.
- Oil wealth is also associated with higher savings rates.
- Relatively low taxes seem to be another factor in high gross domestic savings rates.
The Top Ten Savers
1. Macao (64.3%)
Macao is a former Portuguese colony located near Hong Kong. Like Hong Kong, Macao benefited from Special Administrative Region (SAR) status within China. With an average income of slightly more than $129,000 per person in purchasing power parity terms, the people of Macao can afford a high gross domestic savings rate of 64.3%.
2. Republic of the Congo (61.4%)
The Republic of the Congo is a relatively small African country with its capital at Brazzaville. It should not be confused with its much larger neighbor, the Democratic Republic of the Congo (DRC). The average GDP per capita (adjusted for purchasing power parity) in the Republic of the Congo is about $3,400 compared to $1,100 in the DRC. The Republic of the Congo has substantial oil exports, which helps explain both its higher income and its higher savings rate than the DRC.
3. Qatar (58.1%)
Qatar owes its high savings rate of 58.1% to both its high average income of about $96,000 in purchasing power parity terms and its oil exports. Furthermore, the Qatari Riyal has a fixed exchange rate with the U.S. dollar, which is common among Middle Eastern countries.
4. Ireland (57.6%)
Ireland's gross domestic savings of 57.6% of GDP is impressive, even given the country's high GDP per capita of about $88,000 (adjusting for purchasing power parity). Ireland's high savings rate is also partially a response to the European sovereign debt crisis.
5. Brunei (54.5%)
Brunei is a small oil-rich country located near Indonesia and Malaysia. Brunei has an average income of around $65,000 in purchasing power parity terms, which supports a high savings rate of 54.5%. Some of this saving is accomplished by the Brunei Investment Agency, which is responsible for managing the nation's sovereign wealth fund (SWF).
6. Singapore (53.8%)
Singapore has a gross domestic savings rate of 53.8% that comes out of average incomes of around $101,000 (adjusting for purchasing power parity). Much of the credit goes to the country’s rapid industrialization in the 1960s. Manufacturing drove growth, and Singapore—along with the other tiger economies of Hong Kong, South Korea, and Taiwan—achieved full employment.
7. Luxembourg (53.4%)
Luxembourg's high savings rate of 53.4% comes out of a GDP per capita of about $121,000 in purchasing power parity terms. Luxembourg is a fairly small country, but its status as a tax haven within the Eurozone supports high savings and high incomes.
8. Gabon (52.2%)
Gabon is an African country with significant oil exports. Gabon's oil plays a large role in both the country's gross domestic savings rate of 52.2% of GDP and average income of around $15,000 in purchasing power parity terms, which is much higher than its neighbors.
9. UAE (47.8%)
The United Arab Emirates (UAE) is a Middle Eastern country with a GDP per capita of about $70,000 (adjusting for purchasing power parity) and substantial oil exports. The UAE also has a notable financial industry, with the Emirates Interbank Offered Rate (EIBOR) playing a major role in Islamic finance.
10. China (44.9%)
The Chinese savings rate of 44.9% remains high by global standards, and it was a significant factor in China's economic growth. In purchasing power parity terms, China's average income came close to $17,000 per year in 2019.
Economic Growth, Incomes, and Savings
There is a connection between economic growth, incomes, and savings rates in the above examples. However, the exact nature of this relationship is less clear. The idea that higher savings lead to more economic growth and higher incomes is intuitively appealing.
There is a long-running debate among economists on the role of savings in economic growth.
Another possible explanation is that as incomes grow, people have more money left to save. While many countries with high savings rates also have high incomes, some of them do not. High economic growth, rather than high incomes, might be a better explanation for high savings rates in some countries.
Suppose you made 10% more each year and saved 70% of that increase. Your savings rate would gradually converge toward 70%, even as you spent 3% more on consumption each year. In this way, higher growth supports higher consumption and higher savings rates.
Oil and Savings
Oil wealth is also associated with higher savings rates. Profits from oil exports might support a wealthy elite who are far better able to save. Governments also sometimes set up sovereign wealth funds to preserve capital for their countries after their oil reserves are exhausted.
Finally, a government might sign a long-term development deal with one of the big oil companies. When such a deal goes through, there could be a one-time flood of cash into the local economy. In such a situation, it would be logical to expect the savings rate to increase temporarily.
Taxes and Savings
Relatively low taxes seem to be another factor in high gross domestic savings rates. In theory, lower taxes should lead to higher returns for savers, which would increase the savings rate. In practice, some of the top savers are actual tax havens, while others offer lower taxes than neighboring countries. However, people with naturally higher savings rates moving to tax havens might play a more important role than increased savings among other residents.