Latvian residents save less money with restrictions down, prices up

After last year's record rate of saving and depositing, the levels are going down, Latvian Radio reported May 11. With the end of the restrictions, there is room for spending, and due to high inflation, there is also a need to pay more for everything.

The deposits of Latvian households in banks are currently around ten billion euro or nearly one annual budget of the country. Before the start of the pandemic, it was €7.5 billion. Luminor Bank's economist Pēteris Strautiņš, estimates that the two-and-a-half billion euro rise has been significant over a couple of years.

The impact of the rapid rise in prices and the end of restrictions is reflected by a rapid decline in deposit rates. Dainis Gašpuitis, an economist at SEB Bank, said that last year, deposits grew by a fifth each month, but this year it has fallen twice, with deposits climbing by less than ten per cent on a monthly basis compared to the situation in the past.

“These trends are likely to continue until the end of the year. In other words, it will become more and more difficult to save money. It should be said that similar trends are also observed in both neighboring countries. And certainly one of these basic conditions will be rising prices, or inflation, [..],” Gašpuitis said.

Insurance companies observe that people tend to quit life insurance savings plans, instead opting for the payment of the saved money, said the president of the insurers association, Jānis Abāšins. Compared to the first quarter of last year, this trend has grown by 90%. As one of the reasons, Abāšins mentioned the fear of war in Ukraine. The insurance sector has seen a growth in the first quarter – the insurance premium growth has been 15% compared to last year, for which one of the reasons could also be a fear of the war, said Abāšins.

 

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