Saving for hard times ahead
Corporate and household bank deposits rise significantly as all seek extra liquidity
The measures taken by the government to prop up an economy battered by the coronavirus pandemic have increased liquidity, a fact reflected in higher loans to businesses and a significant expansion in business savings.
Households are also saving more – from an admittedly lower base – as they attempt to weather the crisis. They are borrowing less too, especially for housing.
According to Bank of Greece data, credit growth to businesses rose 5.8% in July, from 3.7% in June; over the same period corporate deposits rose a whopping 24.8%, from 19.1% in June.
In actual numbers, corporate deposits were €31.8 billion at the end of July, from €29.2 billion in June. This was the result of the increase in loans, some guaranteed by the government and some by the Hellenic Development Bank.
The net financing flow – that is the new loans provided to businesses minus the repayments of old loans – rose to €1.4 billion in July from €359 million in June. Total business loans at the end of July stood at €73.5 billion.
Some sectors were more generously financed: Credit growth in industry rose 8.8% in July, up from 6.6% in June; in commerce, it was up 7.7% in July from 2.9% in June. There was also significant credit growth to tourism (6.9% from 1.9%) and transport businesses (14.6% from 3.5%). By contrast, the growth in credit to construction was negative in both June and July (-4% and -3.7%, respectively).
Experts say the fear of a second Covid spike is leading businesses to save a significant part of the capital provided to them by the loans and other instruments, such as the reduction of, or exoneration from, pre-paid tax on 2020 income.
As for households, total deposits rose 6% in July, to €119.7 billion. Money kept in savings accounts rose by €579 million to €61.8 billion, while time deposits dropped €421 million to €40 billion, reflecting the need felt by households to have liquidity at hand to weather the difficult times, especially now that long-term savings are not rewarded by high interest rates.