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International Internet Magazine. Baltic States news & analytics Saturday, 23.02.2019, 11:13

Changes in money indicators in December mostly seasonal in character

Vilnis Purviņš economist, Latvijas Banka, 27.01.2017.Print version
In December, the money indicator dynamic was mostly characterized by changes, seasonally characteristic of the last month of the year – the fastest growth in deposits month-on-month and a small drop in the total loan portfolio. Yet, under the impact of the stable economic environment, the range of these changes was substantially smaller than in December 2015 and the year-on-year rate of growth in deposits dropped in comparison with November while that of loans increased.

The domestic deposits attracted by banks increased in December by 3.0% while the 

rate of their year-on-year growth was at 7.7%. The deposits of nonfinancial enterprises grew by 6.0% (the year-on-year growth rate was 10.5%) and those of households by 3.1% (year-on-year growth rate at 8.8%), whereas insurance companies and other enterprises of the financial mediator sector decreased their deposits with banks.

The Latvian contribution to the euro area money supply indicator M3 grew in December, as the overnight deposits (by 1.2%) and deposits redeemable at notice (by 1.0%) by euro area residents with Latvian credit institutions grew, but deposits with a maturity of up to two years shrank (by 1.4%). In all, the Latvian contribution to the euro area M3 increased by 1.2%, exceeding the level of the corresponding period of the previous year by 6.9%.

The domestic loan balance dropped in December by 0.2%, with the loans to nonfinancial and financial enterprises decreasing by 0.1% and those to households by 0.4%. Since the drop in loans granted to all groups of residents was smaller than in December 2015, the indicators of year-on-year changes in domestic loans continued to improve – the overall year-on-year rate of growth reached 3.0%, with loans granted to nonfinancial enterprises increasing by 1.6% year-on-year and those granted to households dropping by 1.6%. The amount of newly granted loans (not counting the reviewed ones) increased by 33.6% year-on-year in December (including those granted to households by 39.3%)

.Y-y changes in some money indicators (%)


As usual, December indicated that the seasonal jump in budget expenditure in the last month of the year (albeit more modest than a year ago), as well as the activities characteristic of the holiday season and end of the year have fostered a substantial rise in funds in both the current accounts of enterprises and households and in short-term deposits. The total amount of the loan portfolio was affected both by the seasonal short-term loan repayments at the end of the year and the writing off of bad loans characteristic of December which takes place to a greater extent than in other months. However, as the improvement in the annual growth data and the increase in newly granted loans (they grew not only year-on-year but also month-on-month) indicated, the recovery in lending is likely to continue in 2017 as well.  

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