ECONOMY

Tax dues reduced bank deposits in September

Tax dues reduced bank deposits in September

The rise in bank deposits came to an end last month, as the return to some kind of normality and the payment of tax obligations led to a drop in the balances of households and corporations, according to bank estimates.

The reduction is estimated at between 1.5 and 2 billion euros and is along the lines of the tax obligations individuals and enterprises paid last month.

This made September the first month in a long time that the sum of deposits posted a decline. The outbreak of the pandemic in March 2020 found private sector bank deposits at €145.1 billion, of which €117.6 billion belonged to households and €27.5 billion to companies. At end-August 2021 households’ liquidity had risen €14.2 billion to €131.4 billion, and that of corporations by €13.8 billion to €41.7 billion.

Bank officials estimate that the decline observed in September was quite expected given the conditions, and is likely continuing in October. They say this constitutes a healthy reaction of the economy as the support measures are gradually withdrawn and households and corporations have to manage the accumulated obligations the pandemic is leaving in its wake.

Debts secured against borrowers’ main residence will start returning to their normal servicing mode as of early 2022; they are currently being subsidized by the Gefyra program, while the same applies to the business loans subsidized by the Gefyra 2 program. These two categories of subsidies will expire at the end of the year, when banks will probably have withdrawn their own support measures through the favorable repayment programs.

The objectives now are that in the post-Covid era this contraction of deposits proves temporary and that the overall rise in balances is fueled by economic growth with the expansion of households’ disposable incomes, and through state support measures. As for corporate deposits, the target is to turn their record level into investments.

According to official figures, private sector deposits reached a decade-high level of €173.4 billion. From 2011 the course of deposits had been downward in general, before resuming its ascent from 2018.

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