Greece: deposits are growing despite the crisis

Starting from April 2022, the amounts of deposits in the accounts of Greek residents have been growing, while, according to banking sources, the trends are similar in July.

Private sector domestic deposits rose to the highest level since September 2011 at the end of June, amounting to €182.33 billion, with a monthly net inflow of 2.9 billion euros. For the third month in a row, the corresponding indicators are moving up, while, according to banking sources, similar trends are observed in July.

Characteristically, in the period from April to June 2022, the deposit base strengthened by 5.75 billion euros, fully offsetting the outflow recorded in the first quarter. Now the sign of the year is positive, at the level of 2.36 billion euros. A large share of this increase was played by individuals, whose accounts grew by 1.42 billion euros in the first six months of 2022.

Who is in the lead among corporate depositors?

For two months, from May to June, the leaders in the growth of deposits non-financial companies, whose net inflow during this period reaches 3.90 billion euros. Of course, there were four unsuccessful months for the domestic market, which, in addition to reducing consumer spending, were also characterized by a sharp increase in energy prices after the start of the war in Ukraine.

However, in the second quarter of 2022, the rate of deposits reversed, despite an atmosphere of uncertainty, a decline in disposable incomes of the population and the subsequent pressure on the turnover of enterprises in sectors that are mainly oriented to the domestic market.

Reasons for the growth of deposits

According to banking sources, the increase in size is multifactorial and is associated with the following:

1. Strong business credit expansion

According to the Bank of Greece, the net inflow of financing to the private sector in June exceeded 2 billion euros. Of these, approximately 1.9 billion euros were directed to non-financial enterprises and ended up in bank accounts.

2. Growth of the tourism sector

Significant liquidity injections to freelancers and businesses have come from a very strong run of tourism this year, which looks set to set a new all-time record in terms of revenue.

3. Use of electronic cards

Deposit balances, mainly of small businesses, are supported by the growth in the use of cards by both Greek citizens and foreign guests, most of whom pay for purchases in our country by electronic means.

4. Increasing employment

The factor explaining the increase in deposits of individuals, of course, is the increase in employment. It is not just a coincidence that in some sectors, especially in catering and tourism, the supply of jobs far exceeds the demand. In addition, in the OAED registries, the number of registered unemployed from April to the end of June decreased by 75,000, or about 8%.

5. Reducing household purchases

In part, the strengthening of household deposits is explained by the suspension of consumer spending, both for economic and psychological reasons, due to high inflation. People are afraid of being left without a livelihood in case of further price increases.

In particular, for the first five months of 2022 drop in sales in supermarkets is valued at more than 3% year-on-year, while a 20% decline in car sales was recorded. In addition, since the beginning of the year, the household appliances market has been declining at a rate of at least 6%.

6. Liquidation of mutual funds

A new wave of liquidation of mutual funds is working to increase individual deposits as some investors choose to close their positions due to the unstable environment and strong market fluctuations. In June, the net outflow from the mutual fund market exceeded 50 million euros, which also settled in bank accounts.

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