Central bank report analyzes household finances

The Latvian central bank, Latvijas Banka (LB) has published an English-language report on household finances and consumption – though it is somewhat retrospective in nature, covering the year 2020.

"The paper focuses on the net wealth components of the household balance sheet – real assets, financial assets and liabilities. The report includes three special boxes – on precautionary savings, on potential change in household balance sheet due to rising interest rates and expenditures, and on the effect of Covid-19 pandemic," says the abstract. 

Nearly fifty data-packed pages later, it concludes:

"Summarising the results, in 2020, the changes on both sides of household balance sheet resulted in an improvement of the net wealth medians and reduction of net wealth inequality. Rising real estate prices inflated the asset side of household balance sheet. At the same time, reduction in non-mortgage debt participation and the pay-off of outstanding mortgage debt reduced the liability side of the balance sheet.

"The only groups where the outstanding amount of mortgage debt increased were higher income households and households with a younger reference person. The inequality of net wealth distribution declined. Despite some increase in accumulation of net wealth for the wealthiest household group, the proportion of households holding the average size net wealth increased. Growing income is reflected in lower financial vulnerability and better self-assessment measures of households." 

The report, which is co-authored by several LB economists, is available at LB's dedicated macroeconomics website: https://www.macroeconomics.lv/household-finance-and-consumption-survey-2020-latvia-summary-report 

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