The pandemic gave Lithuanians record wealth: the unprecedented amount of deposits grew the most in the euro area

Reached a record

Speaking about household deposits, Paulius Morkūnas, chief economist in the Macroprudential Analysis Division of the Bank of Lithuania (LAC), said that the latter had been growing almost continuously since 1994 and into the last decade of 2020. September. According to the data, the deposits of the Lithuanian population already amounted to about 16.6 billion. Eur, which is a record.

“The quarantine has not stopped the growing trend of deposits: household deposits in banks have been in effect since March. It increased by about 1,400 million. Eur, which is almost 3 times more than the average of 2017-2019. March- September, ”he said.

According to LAC, already at the beginning of 2020, in January, the population had 15 billion in banks. EUR.

In February, that number rose to 15.1 billion. EUR, and in March, when the quarantine began, up to 15.3 billion. EUR. A slightly larger gap was seen in the April data, when savings increased to $ 15.68 billion. Eur and then continued to increase. In May, deposits already amounted to 15.8 billion. EUR, in June – 15.9 billion. EUR, and in July it exceeded 16 billion. 16 100 million euros. EUR. Subsequently, the amount of household deposits continued to increase. It rose to 16.4 billion in August. According to the latest data for September, household deposits amounted to 16.6 billion euros. EUR.

During crises – save

According to the economist, the fact that the population has accumulated funds more quickly may be due to several reasons.

“First of all, residents tend to have liquid funds for contingencies.

For example, in 2008-2010. After the financial crisis, the savings rate increased and approached the European Union (EU) average, but as the economic situation improved, savings in Lithuania were postponed again; In recent years, Lithuania’s savings rate was one of the lowest in the EU.

In addition to these reasons, the growth of the average salary also contributes to the maintenance of the stability of the financial situation of the population, which, according to the Bank of Lithuania in September. forecast for 2020 should reach about 7%, as well as state aid measures to help preserve employment and people’s income.

Also, this year is unique because, due to the current situation, people spend less money on entertainment: more trips are delayed, there are fewer visits to entertainment venues and events. Undoubtedly, a part of that money, which would be converted into expenses in the event of a non-pandemic, also falls into the pockets and deposits of the population ”, explained P. Morkūnas.

Predict 20 percent. Annual growth

Speaking about the growth of deposits by Lithuanian residents, Luminor Bank economist Žygimantas Mauricas said that the current situation is reminiscent of 2015, when the amount of household deposits increased by about 15% during the year after the introduction of the euro.

“And now we already have 16 percent a year. Growth. This was due to three reasons.

The first is that the decrease in household spending was due to restrictions on the activities of some businesses and even those residents who wanted to spend money could not do so because they were nowhere to be found.

The second thing is to spend money on a black day. Usually, as the crisis approaches, residents hoard money for a black day. In this case, no one knew how long the quarantine would last either, so people capped costs on their own, even those they could spend in online stores.

The third reason is the decrease in the use of cash in the market. The amount of money being withdrawn from ATMs has been reduced by more than 50%, which is a very big change. Of course, this was due to a decrease in the demand for money, and there was an active communication about the need to pay with contactless cards, ”said the economist, which generated more savings for the population.

Now Ž. According to Maurico, upon entering the second quarantine, history repeats itself and all the factors that led to the growth of population savings also remain.

“I believe that the growth of household deposits will be even faster and we will reach 2015. the level of adoption of the euro. There, household deposit growth had risen to 18 percent at a time. I believe that household deposits will grow rapidly and I would not be surprised to reach 20% this year. annual growth if the quarantine continues, ”he said, adding that its decline could only be achieved if people no longer had enough income to cover their expenses and began to use their savings.

It is true that the economist added that the growth of household deposits registered today in Lithuania is also the fastest in the entire euro area.

“In Lithuania, growth was 15% in the third quarter, Estonia ranked second with 12%, Ireland ranked third with 11% and Latvia fourth with 10%,” he said.

When asked if the potential for even greater savings will reduce consumption in the future, Ž. Maurice explained that this should not be the case.

“So far, given that revenue growth has been impressive at the beginning of the year and we have entered a very high note in the crisis, even with savings on the rise, consumption has remained at a level very similar to that of the year. past.

There is no drop in consumption, but at the same time we are increasing our savings and becoming a more stable state. This was helped by the increase in wages and pensions, ”he said.

The pandemic has enriched them

Swedbank economist Nerijus Mačiulis also pointed to three reasons for the population’s growing deposits in banks.

“One of the main reasons is that people had fewer opportunities to spend money. During the year, Lithuanians spent around a billion on vacations abroad. Eur, these opportunities were almost non-existent this year so a lot of money was saved here.

Another reason was that there were fewer opportunities to spend money in Lithuania, especially in the spring. Several leisure, entertainment and beauty services were suspended for at least two months, which means that the money also remained in the accounts of the population.

And the third reason is that the government assistance measures in some cases were not related to mitigating the consequences of COVID-19, it is also a one-time additional benefit for children, seniors, students, 200 job search benefit EUR. All these millions of euros have also been deposited in the accounts of the population. For these reasons, the population has been enriched this year. They have more savings than ever in the history of Lithuania, ”he said, adding that in part it can be said that due to the pandemic, Lithuanians have become richer.

“In part, we can say that the pandemic enriched the Lithuanians because they could not spend their money. On the other hand, the government gave them extra money for the pandemic,” he concluded.