Politics

Can domestic savings cover the country’s increasing investment needs?

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The savings-investment (S-I) gap, the difference between gross domestic savings and gross capital formation, reflects the country’s ability to finance its overall investment needs. An S-I deficit happens when a country’s investment expenditures exceed its savings, leading it to borrow to fund the gap. In the second quarter of 2022, the country’s savings rate — gross domestic savings as share of gross domestic product (GDP) — reached 13.7% (P685 billion) while investment rate stood at 27.7% of GDP (P1.383 trillion), resulting in a P699 billion deficit. This was the widest gap in 10 quarters or since the P747-billion deficit in the final three months of 2019.