Rapid growth in spending on consumption has slowed the growth in deposits
Economist at Eesti Pank
The growth in deposits has slowed considerably. Households had around 11%, or 1.13 billion euros, more in bank deposits at the end of May than they did a year earlier. It should be noted in this that in September last year over a billion euros that was withdrawn early from pension funds was paid into private deposits. A large part of that pension money has by now most probably been spent. Deposits have grown modestly over the past eight months, adding 185 million euros or 1.7%. This is despite the intervening period covering the income tax rebates in the spring and the subsequent payouts of pension fund money in January and in early May. If the growth in deposits continues at a similar rate in the coming months, yearly growth will drop to around 3%, which would be the slowest growth since 2010. Total private bank deposits at the end of May were around 11.2 billion euros.
Although incomes have risen rapidly of late, prices have risen even faster, and so saving has declined and the growth in deposits has slowed. Data from the Tax and Customs Board on wages paid out show growth in recent months over the year of around 14%. The average wage paid out has risen by around 10%, and the number of people receiving a wage is up 4%. Data from Statistics Estonia put yearly growth in retail sales measured in euros at around 30% however, and growth in consumption is strong at constant prices. The growth in incomes has previously generally exceeded that in retail sales.
The removal of the Covid-19 restrictions and high inflation have boosted spending and slowed the growth in deposits. The money withdrawn from the second pension pillar has also been consumed at a fast pace. The lifting of the Covid-19 restrictions has encouraged consumption, as spending has leapt up recently on leisure activities and travel, which are no longer subject to restrictions. Growth in spending on consumption has also been raised substantially by very high inflation. This is partly because notably more money needs to be spent than before to purchase the same goods and services, and probably partly because many people have decided to make purchases straight away to beat inflation, and so have saved less.
Please note: Eesti Pank published the statistics for credit institutions and lease companies for May on its website today. The statistical release describes the main changes in the statistics on credit institutions and leasing companies, covering the volume and structure of assets, loans and leases issued, deposits, and interest rates on loans and leases. The statistical release is independent of economic policy releases and is presented separately from them.
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