Economic growth promotes increase in money supply

Along with the stable growth of the economy, including the financial sector, a moderate rise in monetary indicators resumed in Latvia in August.  Both the deposits attracted by credit institutions and volume of cash currency and the total balance of domestic loans grew.

The growth in loans granted to enterprises was faster than in previous months, as the loans granted in lats continued to grow and the euro portfolio resumed expanding. The annual rate of change in loans, excluding the indicators of banks that lost their licences this year from the base improved to -5.2%.

The monetary indicator M3, which characterizes the amount of cash and non-cash currency in the economy, grew by 1.0% in August, reaching a record high of  6.7 billion lats and thereby exceeding the hitherto highest level, that of December 2011. The domestic overnight deposits increased by 1.7% and cash currency in circulation by 0.9%. Time deposits and deposits redeemable at notice remained practically unchanged.

Both the money supply and the situation in lending currently reflect the overall successful economic development of the country both domestically and in regard to the complicated and fluctuating external economic environment. In the coming months, however, the overall positive trends could slow down unless the external risks diminish substantially. Yet a gradual increase in entrepreneurs’ stocks and an opportunity to develop production also on the basis of loans will allow for an exploration of the possibilities opened up by increased domestic demand as well as the recovered competitiveness in the external markets.