Public savings

Public saving is the total saving made by economic agents in the public sphere, when the amount of public income they collect exceeds the amount of public spending they face within their economic activity.

This type of saving is a concept of macroeconomics that can therefore appear in the activity of any public company, government or other organizations dependent on the state. At the level of economic aggregates, together with private savings, they form the set of national savings.

Relationship between public savings, deficit and surplus

As with the generic definition of saving, public saving is understood as the difference between income and actual consumption. In this case, when speaking of the public sphere of the economy we would be referring to the total volume of funds that an administration or a government conserves after meeting its public spending commitments and taking into account previous income.

After receiving public funds by way of tax collection through other financing methods such as the sale of public debt, the State must meet its social commitments through spending on infrastructure, health, the payment of public subsidies and benefits ,etc.

If after this work of spending there is a positive difference between income and expenses (which is economically known as a fiscal surplus), this amount will be the one that will make up the public savings produced. The destination that generally tends to have this difference is that of public investment and the improvement of budget items aimed at public spending in future years.

When savings do not appear and what happens is exactly the opposite (income is lower than the level of expenses) what appears is a fiscal deficit.

Public savings as an economic indicator

The appearance of public savings does not necessarily usually suppose the good action of a Government. This is explained because the appearance of fiscal surpluses may be a consequence of very strong fiscal policies with high levels of taxes or of insignificant public spending plans.

In both cases, it is society that suffers an adverse economic situation through its impact on the activities of private agents (families and companies).