Analytics, Banks, Latvia
International Internet Magazine. Baltic States news & analytics
Tuesday, 19.03.2024, 07:00
Moderate growth continues in the monetary sector
The balance of domestic loans increased in June by 0.1%, with the loans granted to nonfinancial enterprises increasing by 0.1%, loans to financial institutions by 1.4% and consumer loans to households by 0.5%. Only loans for house purchase slightly dropped. The rate of annual rise in total domestic loans reached 1.4%, and in June it turned positive also for loans to nonfinancial enterprises (+0.02%), remaining below zero (-3.3%) only for loans to households.
The domestic deposits attracted by banks increased in June by 0.8%, with the rate of their annual growth at 12.4%. Household deposits increased by 1.7% (rate of annual growth 7.3%), and enterprise deposits dropped by 0.3% (annual growth in June 18.9%).
With deposits growing and the demand for cash virtually unchanged, the Latvian contribution to the euro area total money supply indicator M3
increased. The overnight deposits by euro area residents with Latvian
credit institutions rose in June by 1.5% and deposits redeemable at
notice by 0.8%, whereas deposits with the set maturity of up to two
years shrank by 0.8%. Overall, the Latvian contribution to the euro area
M3 increased by 1.1%, growing by 11.6% year-on-year.
Y-y changes in some money indicators (%)
Source: Latvijas Banka
The renewed increase in lending, albeit small, and the
maintenance of a moderate rise in deposits characterize the overall
stability that is observed in the Latvian economy. Even though
fundamental changes are not expected in these trends, we must note some
factors that influence them. Among those, is an interruption in the
availability of European Union (EU) structural funds, which hinders the
lending to construction projects, yet one reason for hope is the stable
progress observed regarding the readiness to begin investing, according
to the informative report of the Ministry of Finance on the status of EU
fund investment introduction. Another is the allotment of additional
funding for the housing support programme adopted by the government at
the beginning of July, which gives rise to a more positive view of
lending to households. The expected exit of the United Kingdom from the
EU, on the other hand, means increased uncertainty and possible
postponement of investments in the shorter and medium term.
www.macroeconomics.lv/moderate-growth-continues-monetary-sector