The increase of income of Latvian households has contributed not only to the increase of private consumption, but also the state of financial savings, including deposits in all three Baltic States. Thanks to the increase of the financial security pillow, more and more families in Latvia are now capable of overcoming sudden financial shocks.
Furthermore, the improvement of the economic situation also contributes to residents’ positive outlook for the future. Residents now more actively take loans – demand for this service has increased. Nevertheless, it has yet to reach its pre-crisis level. No risks to economy are noted in relation to loans at the moment, accord to results of the Baltic Household Outlook by SEB Bank.
Last year, income of households had increased across all three Baltic States. Actual average wages had increased by 7.4% in Latvia, 6.9% in Estonia and 6% in Lithuania.
The actual purchasing power of Latvian residents had reached its pre-crisis level last year. Last year, actual average wages were 10% higher in comparison with 2008 and 25% higher in comparison with the peak of the economic crisis in 2010. According to SEB Bank’s estimates, actual income of residents per family member was approximately 7% higher in comparison with the pre-crisis period. In addition, income had increased for all household groups.
In spite of increased consumption in all Baltic States, residents continued creating savings last year. The volume of deposits made by residents had increased by 7.9% in Lithuania, 7.4% in Estonia and 6.3% in Latvia. The volume of savings of Baltic Residents had reached its historic maximum last year.
«Active creation of savings points to the fact that households are becoming more financially capable. This means they are also more prepared to face unexpected financial and economic shocks. The growing financial stability of residents is confirmed by the latest EU-SILC outlook, which mentions that the number of families unable to pay for unexpected expenses continues to decrease,» – as noted by SEB Bank social economy expert Edmunds Rudzitis.
Increasing income and growing confidence in tomorrow also contribute to the demand for mortgage and consumer loans. Compared with 2014, the volume of mortgage loans issued in 2015 had increased by 21% in Lithuania, 15% in Estonia and 9% in Latvia.
«The state programme for support of families with children played a major role in Latvia – it made mortgage loans more accessible. Nevertheless, the total volume of new mortgage loans (EUR 21 million) remains below the amount returned for previously allocated loans. Because of that, the total mortgage loans portfolio continues to decrease,» – underlines Rudzitis.
Demand for consumer and other loans had also increased in Lithuania and Estonia last year (+6.3% and +1.8%, respectively).