Money supply has stabilized
The money supply in April increased above the relatively low level in March, again returning to an amount slightly above the average for last year: the total amount of money in circulation in April had increased 1.5% year-on-year. Both the balance of bank-attracted deposits and demand for cash currency grew slightly and the balance of loans granted dropped only 0.2% month-on-month, which is the smallest decrease within the last eight months.
The overall loan balance dropped by only 20 mil. lats, but lending to businesses expanded. A small drop was observed only in the portfolio of loans granted in euro whereas lending in lats and other currencies grew. The annual drop rate of loans also improved, to -10.3%, but, adjusting it to reflect the impact of the reduction in the number of credit institutions that took place in March, the drop rate was only -6.8%.
Money indicator M3, which characterizes the amount of cash and non-cash currency in the economy, grew in April by 0.6%. The balance of bank-attracted domestic deposits in April increased by 0.5% on account of lats deposits by both businesses and households. The total amount of cash currency in circulations outside banks rose by 0.7%.
The growth of Latvian economy under the conditions of high external risks continues to be stimulated, among other factors, by the stability of money supply and increased activity in lending to enterprises. Both the inflow of loans in the business sector and expenditure by the population have promoted a rise of business deposits with banks while the household sector has preferred spending and continued to direct its deposits for repayment of loans, with the deposit growth in this sector therefore minimal. Generally similar trends can be expected in the coming months as well, because the external risks will act to prevent a significant rise in lending, although a moderate increase in lending to businesses can be expected even then. Only in May, the level of monetary indicators will still be brought down by excluding the data of AS "Latvijas Krājbanka" as a result of annulling its credit institution licence.