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Friday 23.02.2018 | Name days: Haralds, Almants
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Share of cash money in circulation drops as Eurozone membership draws near

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February’s increase of money availability in Latvia was generally moderate – company investments increased slightly, while the rise of household investments was noted along with the reduction of the share of cash money in circulation.

There were next to no changes in domestic credits – payments of household credits dictated a slight reduction of the total credit portfolio. Company crediting rates remain on February’s level, according to Vilnis Purvins, economist of the Bank of Latvia.

The M3 money index (shows the volume of cash and non-cash money in the economy) increased by 0.6% in February. It annual increase was 3.4%. Domestic overnight deposits continued to grow as well. This also applies to deposits with a warning period for withdrawal and – for the first time in the last nine months – deposits with a set term of up to two years. The volume of cash money in circulation, however, decreased.

The use of cash money reduced by 2.1% during the month. Its annual change rate became negative for the first time in the last three years.

Last month’s domestic deposits of the household sector increased by 22.9 million LVL, while the volume of cash money decreased by 21.7 million LVL. This shows the possibility of households trying to reduce the role of cash in their savings with the prospect of joining the Eurozone coming closer and closer. A clearer Euro perspective in addition to growing export revenue have improved the increase of corporate deposits made in Euro. While the total amount of corporate deposits increased by 16.8 million LVL, their Euro proportion increased by 41.5 million LVL.

In February, the surplus of credits issued to non-profit companies changed little. The credit portfolio of households, on the other hand, decreased by 0.5%.

“The stability of the national economy and beneficial macro-economic indexes have secured the stability of money available. We should not expect any serious changes in the next several months as well. Progress toward joining the Eurozone will increase the role of currency in the structure of money availability, decreasing the general use of cash in the economy in the process. Export revenue and stable domestic consumption will also secure a moderate increase of money availability,” – Purvins explains.

According to the economist, the national economy’s stable development will reduce the excessive carefulness of creditors in regard to taking on new obligations – especially for investment purposes of export enterprises.

Ref: 102.109.109.6719


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