National saving refers to the total amount of savings accumulated within a country, which includes both private saving and public saving. It’s a key indicator of a nation’s financial health and its ability to invest in future economic growth.
Private saving is the portion of an individual’s income that is saved rather than spent on consumption. This encompasses savings by households and businesses. Higher private saving can lead to more available funds for investment, contributing to economic growth.
Public saving, on the other hand, is the difference between government revenue and government spending. If a government runs a budget surplus (revenue exceeds spending), it contributes positively to public saving. Conversely, a budget deficit (spending exceeds revenue) decreases public saving.
The relationship between these three variables is crucial for understanding a country’s overall savings. National saving is the sum of private saving and public saving: National Saving = Private Saving + Public Saving. When private saving increases, it can lead to lower interest rates and increased investment. Similarly, if a government reduces its deficit or runs a surplus, it can enhance national saving. Thus, changes in private or public saving can significantly affect national saving and, ultimately, a country’s economic trajectory.