Inflation has exceeded 20% in Estonia and currently is the highest rate in Estonia. That has led many domestic consumers to start using their savings to maintain consumption levels and keep up with inflation, as reported by public broadcaster ERR.
Bank of Estonia economist Taavi Raudsaar told ERR that: «Private individuals still have a total of 11.16 billion euros in savings as of the end of July, but it must be taken into account that this money is very unevenly distributed, and many people will not be able to maintain their consumption at the previous level for any length of time, at the expense of savings.»
Rasmus Heinla, head of private customer banking at Coop Bank, said that the volume of private deposits at that bank grew very strongly in the two–year period from the beginning of the coronavirus crisis in the spring of 2020, until the spring of this year.
The main factors behind the growth were reduced consumption resulting from Covid restrictions put in place, and also the disbursement of pension funds, following the liberalization of the Estonian pensions system, but in recent months this had trickled out.
Heinla said: «Many people are now using their savings to cope with inflation and the significantly increased prices for goods and services.»
Kadri Haldre, Treasury Manager at Estonian bank LHV Pank, said most deposits were, in fact, growing.
She said: «The growth of regular customers’ deposits has stood at around 20% per year, while retail customers’ deposits have grown slightly faster; companies’, more slowly. For instance, in August, deposits from LHV’s regular customers grew by as much as EUR 102 million.»
The general trend in banks across the country for a fall in deposits had first become evident in September last year, though since then, some months deposits grew and with others they fell, until the current, soaring rates of inflation arrived in spring.
Energy prices had started set record levels, only for these to be broken again shortly afterwards, from late summer last year.
Tanel Rebas, the head of private banking at Luminor, said the bank had yet to see any significant changes in deposits, and the volume of deposits remained stable.
Ulla agreed the slowdown in deposits growth had started last autumn, albeit off the back of exceptionally high levels prior to that – Swedbank took in almost a billion euros from second pension disbursements alone, he said.
Earlier in the week, Bank of Estonia director Madis Müller stated, that autumn and winter for inhabitants will be harder economically, however, the economics crash is not likely to happen.
He added that the current downturn is influenced mainly by the Russian invasion of Ukraine; the state budget will remain in deficit for the foreseeable future.