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Monday 16.07.2018 | Name days: Hermīne, Estere
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Bank of Latvia: economic stability balances money availability

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There was a stable economic growth throughout the whole of 2012. This secured attraction of investments to credit institutions and the general increase of a balanced money availability, notes Bank of Latvia economist Vilnis Purvins.

“Without a steep economic environment and, especially, financial sector fluctuations, the increase of the money index was more moderate that that of the end of 2011. ”

The domestic credit portfolio reduced in December, but the reduction was lowed than the one a year before and it was mostly dictated by the pay back of the previously received short term credits within the sector of non-financial enterprises, – explains the bank’s expert.

According to him, the seasonal increase in salaries in December dictated a more rapid increase in households, all the while reducing the volume of available resources to businessmen. The reducing influence on enterprise investments was also noted on relatively large loan payments in the end of the year. December’s non-financial enterprise investments increased by 0.7%, while household investments – by 1.5%. However, a very pronounced predominance of an increase of enterprise investment remained throughout 2012 – 7.6% and 2.1%.

The M3 money aggregate, which shows the volume of cash and non-cash money in the economy, increased by 0.6% in December. “The equalizing of the annual money and investment rate (4.1% and 4.5%) should also be mentioned. This may be due to the characterized increase in the use of cash money after the end of the crisis years. The change of this trend is most likely related to two factors – the restored trust in the stability of the banking sector and the possible reduction of the shadow economy’s activities,” – notes the economist.

December’s surplus of issued credits to non-financial enterprises decreased by 2.8%, while the credit portfolio of households – by 1.1%. The main role in December’s reduction of credits was played by payments of short-term credits. A smaller than the previous year’s reduction dictated that, without the 2012 index of banks that lost licenses, the rate of change of enterprise crediting now came close to zero (-1.0%). In spite of the general reduction of the credit surplus, the overall volume of issued credits continued to grow in December.

“A positive mood of consumers and growing income dictate the development of money availability in the first months of 2013. No rapid changes are expected to come in the near future. However, we can expect a rapid increase of investments along with the further improvement of the general economic situation. This also applies to an increase in demand of competitive credits. In the event of a positive decision in regard to Latvia’s joining of Eurozone, there could be a reduction of available money in circulation in the second half of the year. Latvian residents are likely to turn to non-cash money storage opportunities during the transitional period,” – predicts Purvins.

Ref: 102.109.109.5762


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