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The following paradox has been occurring in our country for months: while it lasts the coronavirus pandemic increases at the same time the bank deposits of households and companies, Despite declining revenues, hundreds of stores have been “blocked” and thousands of people have lost their jobs.
It is characteristic that since last February, when the acute respiratory disease 2019-nCoV broke out in Greece until today, the total deposits in banks it increased by more than… 14 billion euros (!) compared to the same day last year.
Now it is becoming clear in practice that households consume less and save more, while companies that continue to operate during the implementation of restrictive measures are careful to keep in their bank accounts the money they obtain from the sale of their products and what they receive from the Refundable Advance.
We don’t go out to have coffee
Nor should we forget that the reduction in household consumption (which translates into a bit more money in your pocket compared to the pre-Covid era) is also due to the fact that a number of activities are closed (such as hotels and restaurants). ) or low performance (such as coffee that operate by the take-out or delivery method but clearly less consume coffee from these stores). And of course the companies postponed the implementation of investment plans until the situation is clarified.
Seven-year record
So the total amount of deposits now stands at € 169 billion, a new seven-year record! From the comparative data we find that in January 2020 (shortly before the first cases of coronavirus were registered in Greece) deposits amounted to 156,000 million euros.
Ten months later, at the end of November, despite the adversity and the financial crisis that had turned into an economic crisis, deposits already reached 169,000 million euros, of which 158,000 million were savings from homes and companies and 11,000 million remaining, the general worried. government, that is money placed in financial institutions by the state to cover their obligations, such as the salaries of civil servants and pensions.
We raise money because. We do not know what will dawn
From Bank of Greece It is officially interpreted that people rushed to make deposits mainly for welfare reasons, in the face of future needs. In other words, since the Greek does not know “what will happen to him” with the prevailing situation, he is careful not to spend a lot of money, but what he earns each month with his work and has left over, to put for security in the bank.
At the same time, it is noted that the direct state aid that was credited to the accounts of the companies to face the pandemic, remained largely intact, on the part of the entrepreneurs who are also saving the time that will be in store for them.
The explanation given in the Bank of Greece interim report
The Governor of the Bank of Greece, Giannis Stournaras, also gives another explanation, noting in his interim report, that “the increased use of electronic means of payment during the period of the pandemic favorably affected the development of commercial deposits.” It adds that “the increase in deposits of non-financial corporations (MXE) in the period January-October 2020 came mainly from demand deposits.
The annual variation rate of demand deposits of companies, after remaining stable around 7% in 2019, accelerated significantly from February 2020 (ss when the pandemic reached our country), reaching 39 in October, 4%. However, the increase in commercial time deposits was also notable during the period under review.
The contribution of government support measures
Household deposits, which represent around 80% of national private sector deposits, increased by € 5.3 billion between January and October 2020, compared to € 4.7 billion in the corresponding period of 2019, while the annual average rate Its growth rate remained stable at around 6%.
Despite the sharp drop in real disposable income due to the coronavirus and the continued contraction in mortgages and consumer loans, household deposits were supported by government-implemented income support measures and deferrals of consumer and other expenditures, o The deterioration in employment prospects, at least in the short term, has contributed to strengthening the saving behavior of households.
The usefulness of deposits as a means of payment
Furthermore, the Bank of Greece points out that the increase in household deposits came exclusively from the so-called “demand deposits” (simple savings deposits, cash deposits and checking accounts).
In addition to the impact of measures to support household liquidity during the pandemic, the preference to retain the most liquid forms of deposits continued under the influence of the historically very low level of nominal interest rates and the increasing utility of deposits. as a means of payment. ., which probably escalated at times during the pandemic period.
At the same time, central government deposits are declining
However, it is worth noting that at the same time that the deposits of ordinary Greek citizens increased, those of the central government decreased, that is, the money that the state has in the banks. In particular, in the period from January to October 2020, central government deposits with commercial banks decreased by € 4 billion or 37.1% compared to the end of 2019. The decrease was particularly strong in April and May 2020, reflecting tax measures to support businesses. and homes due to the pandemic.
Decrease also for the savings of municipalities and regions
However, it is noted that the central government deposits in the Bank of Greece remained roughly unchanged between the end of 2019 and the end of October 2020. At the same time, the deposits in the commercial banks of the Social Security Organizations and the Local Government organizations, which together with the central government constitute the general government sector, also decreased by 1.6 billion euros.
Deposits from other sectors, that is, insurance companies (+0.8 billion euros), non-residents (+0.6 billion euros) and other financial companies (had a positive contribution to the deposit base of the Greek banks during the period analyzed). +0.3 billion euros).
Forecasts from now on
A large portion of the billions raised over the past 11 months is deferred consumer spending in 2020 that is expected to be met once restrictions are lifted and the pandemic wave is significantly reduced.
Therefore, we expect a 3% increase in private consumption in 2021 (compared to a decrease of 7.4% in 2020), a forecast based mainly on the increase in Gross Domestic Product but not on deposits that have been collected and they are essentially outstanding consumer spending. . Therefore, the increase in private consumption is expected to be even greater.
We are expected to spend more after Easter
The importance of a strong boost in consumption is easily understood when one considers that public and private consumption represents 65% – 67% of consumption. GDP. So if the rise in private insurance is due to deposits accumulated shortly after Easter (which falls on May 2 this year) and after the vaccination program is progressing well in the meantime, a significant boost will be given to businesses that remain closed due to a pandemic, completely changing the image. In other words, it will be the turning point for us to move from recession to growth.
Finally, the complete reopening of the market will be followed, among other things, by the partial entry of a pile of Community funds from the European Recovery Fund, for a total amount of € 32 billion, part of which is expected to contribute to general economic recovery. However, this remains to be tested in practice.
