VILNIUS - People aren’t celebrating an improvement in their living conditions just yet, but the statistics show that there is certainly no lack of money floating around, as the amount of deposits currently taking up space in Lithuanian banks has beaten all-time records, reports news agency ELTA. According to the Bank of Lithuania, in the second quarter of this year, the amount of deposits jumped to 43 billion litas (12.4 billion euros), the largest sum ever kept in the Lithuanian banking system.
Individuals have entrusted 25 billion litas (7.2 billion euros) to banks, and the remaining sum belongs to private companies and financial institutions. Over the past year, the amount of deposits and letters of credit increased by 12.3 percent, while resident deposits went up by 6.1 percent. In the second quarter, natural persons grew their savings both in litas and foreign currencies, in more or less equal amounts.
Financial analysts ascribe this drive to economize, despite low deposit rates, particularly to psychology, i.e. the fear of a not secure tomorrow. According to economists, such a savings’ pattern has both advantages and disadvantages. “Surveys show that people do not expect an improvement, they still anticipate deterioration. It is normal to economize in this case, but it is not good for speeding an economic recovery as the capital is accumulated but is not spent for consumption. The domestic market remains weak,” said Gitanas Nauseda, adviser to the SEB bank president. “The government also contributes to such economizing by its statements about new taxes and cutbacks in social benefits. People hear all this and draw certain conclusions, and then everything has a negative impact on the state itself,” in terms of spending.
Chief DnB Nord bank analyst Rimantas Rudzkis agrees that an increase in deposits does not mean an economic recovery. A part of the money went into various investment projects; an increase in stock prices was attractive, too. Now the investment in various securities and real estate has fallen and deposits have increased, Rudzkis says.
Independent financial analyst Vaidas Vysniauskas notes that in some sense, such savings act as a brake on the economy. Exports have started growing, but those companies who are oriented to the domestic markets still see no signs of a recovery. “It is logical that a large amount of money should lead to low interest rates on loans, unless the European Central Bank does something with the euro and the litas weakens, but this is very unlikely. There is money; banks do not know where to put it as there is a lack of normal demand from low-risk projects. With a more sustainable recovery, money will be used again and there will be a lack of funds. Then interest rates will rise again, but this will not be the case for the coming year, most probably,” predicts Vysniauskas.