20.09.2010.

The stabilization of the economy strengthens money supply: the first positive signs in lending

As the fragile trends of economic recovery take root, the amount of money in circulation continues to grow. As in July, in August 2010 money indicator M3, which reflects the amount of cash and non-cash currency in the economy, grew again (by 1.3%), while the annual increase in M3 reached 10.6%.

The amount of money in August was affected both by the increasing demand for cash currency - its amount in circulation grew 1.0% -, and by the increase in deposits attracted by banks. As both the bank-attracted overnight deposits and term deposits increased, the total amount of domestic deposits grew 1.0% in August, posting a 9.1% year-on-year increase.

In contrast to the rapid decrease of the preceding months, the total amount of domestic loans remained almost unchanged in August (within a month the loan portfolio decreased by only 0.1%). After prolonged downslide, the loans granted to non-finance enterprises grew slightly for the first time. A moderate drop continued in household lending - affecting both housing and consumer loans. The rate of annual drop in lending thus decreased to 7.4% in August.

It can be expected that the next few months will bring more clarity as to whether banks, reacting to the rapid growth of exports and manufacturing industry, will indeed begin to lend more extensively and actively to entrepreneurs, which would be necessary for further recovery of the economy.  A decisive role in the furthering of positive trends will be played by clarity regarding the 2011 national budget, i.e. certainty as to whether costs will be consistently cut and a stable tax policy carried out.

APA: Purviņš, V. (2020, 26. nov.). The stabilization of the economy strengthens money supply: the first positive signs in lending. Taken from https://www.macroeconomics.lv/node/2408
MLA: Purviņš, Vilnis. "The stabilization of the economy strengthens money supply: the first positive signs in lending" www.macroeconomics.lv. Tīmeklis. 26.11.2020. <https://www.macroeconomics.lv/node/2408>.

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