Building back financial health: Europe post-pandemic

The past 12 months have shown no shortage of negative financial news. From increased unemployment levels to countless business closures and several industries forced to a standstill, the pandemic is widely considered to have delivered the fastest global economic shock in decades.

However, new findings from the Think Forward Initiative (TFI) show that the majority (52%) of Europeans believe that after a year their financial health has been unaffected by the pandemic. A small minority of 12% even saw an improvement.

More than half of the 8,000 respondents, across eight European countries, Austria, Belgium, Germany, the Netherlands, Poland, Romania, Spain and Turkey, who were surveyed in February-March this year, said that whilst the continent’s financial health was adversely affected by the pandemic, these effects were felt by their countries to a greater extent than by themselves individually.

Just over one third (36%) of respondents reported a drop in their personal financial wellbeing during the pandemic, which is considerably lower than those who believed the pandemic had deteriorated their fellow countrymen’s financial standing (61%). Likewise, the number of respondents who thought their country had suffered no financial health change (28%) was nearly half that of those who had felt no change themselves (52%).

This suggests that while Europeans believe the pandemic has had a negative economic impact on their country and people living in their country in general, this impact is not fully felt by themselves as individuals. Very interestingly, most consumers also remain quite optimistic about the near future, forecasting their own and others’ financial health to continue recovering in the upcoming year. There are a number of reasons which may be behind this relative optimism. Media narratives may, for example, inadvertently be driving expectations on national financial health to be more extreme than reality. So while the headlines might still sound quite negative, some people have perhaps not felt the pinch as much as they were expecting. Others are getting back on their feet along with the recovery of the economy in many sectors. Equally, TFI’s findings suggest that the introduction and prolonging of financial support and job retention programmes, such as Germany’s Kurzarbeit or France’s Chomage Partiel schemes, are successfully providing resilience to those who need it most. Governments, industries and individuals will need to keep a wary eye on the future and continue to adapt, so as not to risk the onset of further pandemic economic fallout.

Of course, when considering who has been impacted by the pandemic the most, age and nationality are key factors. TFI’s survey found people under 55 were more likely to report negative financial impacts as a result of the pandemic. It also suggested that each nation’s handling of the crisis directly reflects an individual’s perceived financial position: the Netherlands came out top, scoring the highest amongst all countries in terms of both financial satisfaction and saving habits – 45% of the nation say they are financially satisfied, 54% claimed to have an emergency fund for unexpected expenses or financial shocks, and 46% state that they are managing well to save and invest for their future. At the other extreme, Poland scored the lowest in these same areas, with just 22% of respondents reporting satisfaction with their current financial situation, 30% having an emergency buffer and only 27% noting that they are taking positive financial action for their future.

Perhaps unsurprisingly, the impact of Covid-19 has been perceived to be far less significant in countries with a more financially secure population. Those in countries who rated their individual and collective financial health more favourably prior to the pandemic – namely the Netherlands, Belgium, Germany and Austria – tended to rate it more favourably now. For example, on average, respondents in the Netherlands reported a pre-pandemic financial satisfaction score of 7 (out of 10) – only 0.1 higher than their current rating.

At the other end of the spectrum, those who believed they had poorer financial health prior to the pandemic in Poland, Romania and Turkey – considered their personal finances to have been more significantly changed across the past 12 months. Respondents in Turkey, for example, reported an average pre-pandemic personal financial health scoring of 5.9 out of 10 – the joint lowest alongside Poland – which dropped considerably to a current rating of 4.9.

The belief that one is less likely than others to experience a negative event, reflected in TFI’s findings on personal and collective financial health, suggest an “optimism bias”. This is reflected in the fact that the European population has displayed extraordinary personal resilience throughout the Covid-19 crisis, despite perceiving their wider nations as suffering more.

Moreover, people are acting now. TFI’s findings show that around 90% of respondents are now shopping and spending more consciously and actively controlling or reducing their spending as a direct result of the past 12 months. The majority of respondents also said they are saving regularly, keeping track of their income and expenses, and setting long-term financial goals. All in all, most people seem to have become not only more aware but also more active in looking after their financial situation today and in the future. That is what, in the end, the TFI stands for: empowering people to make better financial decisions.

pandemic time scale

Of course, the full long-term implications of the past 12 months have not yet taken full shape. With the continuing approval and rollout of a number of vaccines, there is a lot to be optimistic about. Indeed, every country in TFI’s survey believed their financial health would improve or at least remain the same a year from now.

Europe is under no illusion that it will take time to fully recover from Covid-19, both in terms of our physical resilience and financial wellbeing. The two are in fact highly linked, with a vast majority of Europeans (76%) regarding their personal financial health as having an influence on their personal physical welfare. With the focus having been so heavily centred on physical health over the past 12 months, the spotlight looks like it will soon be turned onto the health of a different kind.


Maria Ferreira is a Senior Behavioural Economist at TFI and ING.