People’s savings in banks and financial institutions lost strength in the third quarter of 2023, according to Scotiabank’s recent economic report. Although there is growth in the sector due to the rise in term deposits – even to historical levels – in savings accounts, which account for 50.5% of total savings, they do not stop falling.
In fact, Peruvians’ savings grew just 2.9% in the third quarter, totaling S/5.3 billion in the last 12 months. “These data reflect a slowdown, as the readings are weaker of the last year and the historical average, except for the pandemic, where a flow of S/11,000 million and growth above 10% is reached,” the banking entity states.
Deterioration of regulated savings
Regulated bank savings, which are made up of deposits in the salary account and CTS, contracted up to 15.6% in the July-September period; and has been in negative territory for 12 consecutive months. Despite the slowdown, this savings constitutes the majority of the savings: 54% of the total (see infographic).
In detail, the balance of people’s savings deposits fell 15.7%, accumulating a flow of S/103,000 million, and they direct part of the savings rate to term accounts, taking advantage of the interest rates high and consumption.
Ricardo Ávila, senior analyst of Economic Studies at Scotiabank, explains that this contraction in savings deposits is due to the fact that the Peruvian economy has entered a recession, which causes people to begin using these resources to compensate for the fall that is taking place. It is giving rise to the real income of workers.
“An economic weakness and High price levels have made people use these types of accounts to be able to compensate for their purchasing loss and they are directing part of these deposits to basic consumption,” the expert told La República.
Meanwhile, the balance of deposits in Compensation for Time of Service (CTS) accounts fell 13.5%, since, after reaching S/17,000 million in December 2020, it is now at S/6,800 million, a 60% less, as a consequence of the releases authorized by the Congress. These cover 3.6% of total deposits.
How does discretionary savings come about?
The opposite happens with the discretionary savingscomposed of time deposits, mutual funds and non-pension funds, which rose 55.2% in the third quarter, above the end of 2022, when a growth of 41.2% was observed.
Breaking down the figures, time deposits reached a balance of S/54,352 million, also exceeding what was seen in the previous year; However, it slowed down considering that in the first quarter of 2023 it reached 127%.
According to Ávila, this slowdown in fixed-term deposits is due to the fact that the interest rates paid by financial entities to savers have begun to decrease, in line with the reduction that the Central Reserve Bank of Peru has been making ( BCRP) on its reference rate, currently set at 7.25%.
On the other hand, the assets managed by Mutual funds for individuals are accelerating and has a growth of 17.0% in September, after having sharp falls during 2021 and part of 2022.
Finally, non-pension funds—which represent only 1.0% of savings—are freely available voluntary contributions, which have remained in negative territory for the last 19 months, accumulating a balance of S/1.8 billion.
Savings could continue to fall if the labor market continues to lose strength, and the GDP also.
Interest rates are in line with BCRP policy
Scotiabank specifies that the average rate on time deposits published by the S.B.S. It follows the dynamics of the BCRP reference rate “very well.” In detail, the average ratio for these term deposits is 7.25% of the issuing entity.
On the other hand, it warns that the interest rates on CTS deposits have not attempted to attract more resources, and have maintained their rate between 2% and 3.50% in the last two years.
And, regarding the BCRP interest rate, they estimate that it would decline cautiously and would culminate in 5% only in 2024. It should be noted that the central bank It is guided by the decisions of the United States Federal Reserve, an authority that foresees an extension of the reference rates for longer than expected.
The word
Ricardo Ávila, economist at Scotiabank
“Economic weakness and high inflation prices have led people to use these savings deposits, which is why they are slowing down a little.”
Source: Larepublica
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