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Savings are reduced due to lower purchasing power

Savings are reduced due to lower purchasing power

“Save bread for May,” says one of the most popular morals in our country, considering that we are not free from the calamities of life; for example, the current deterioration of the Peruvian economy.

In this regard, the Superintendency of Banking, Insurance and AFP (S.B.S.) details that the level of savings of natural persons in The banking sector exceeded S/158,144 million As of September: S/145 million less than at the beginning of this year and S/1,288 million less in interannual terms.

Alfredo Marín, assistant manager of Retail Liabilities at BanBif, argues that citizens have chosen to save less as a result of the constant loss of the purchasing power of the sun—read, inflation—which forces families to have a higher percentage of their income to “purchase exactly the same things as two years ago: payment for services, gasoline, food and clothing, among others.”

Furthermore, it is also explained by the drop in employment adequate, which still does not exceed pre-coronavirus levels—and plunges more workers into precariousness. According to Marín, the decline in private investment is key to this problem, since it generates jobs with longer duration and higher remuneration.

The latest INEI report shows that 2.1 million Peruvians are underemployed – that is, they work fewer hours and are paid below average; while business expectations remain in the pessimistic range, according to data from the Central Reserve Bank of Peru (BCRP).

The change is also due to “the high interest rates offered by the banking system” due to the BCRP’s monetary policy, which was not enough to attract greater savings balances.

Marín comments that so far this year Time deposit balances in banks increased by 52% to the ninth month, and in that same period, the savings balances of individuals fell 14%.

“Those who have been able to save have done so in highly profitable products, parking their funds for a certain period. Here we can see a modification in the savings pattern of those who can save and cover themselves from the effects of the inflationbecause your money retains real value against inflation in fixed-term deposits,” he noted.

End of the year would be better

For the remainder of 2023, it is possible that savings balances will rise after the payment of the CTS and the bonus, which can leverage the universe of bank savings.

According to Pacific Business School professor Jorge Carrillo Acosta, depending on the annual effective rate of return, the strength of the financial institution and additional benefits, the extra money we receive in these months can be used for the future. “To date we could have a rate of 8.5%. Today there are no good rates like before, but this should be reversed soon.”

BCRP: savings fears dissipated

During his participation in the CADE 2023, Julio Velarde, president of the BCRP, said that “the fears of the people who withdrew their savings and investments have already dissipated” —in reference to the political tension seen at the end of 2022 and the beginning of this year— and that “there will be a little by little return” of capital, whether from natural persons or private companies.

Regarding the reference rate, he stressed that globally these remain high, and although they reduced them for the local market to 7.00%, this does not imply successive reductions. Even if a strong El Niño phenomenon occurs and inflation shoots up again, the fall in the interest rate would be interrupted. According to the banker, Inflation would normalize in April 2024.

Figures

  • People’s savings balances fell 14% as of September.
  • 7.0% is the rate set by the BCRP. Its relegation will depend on the FEN.

Source: Larepublica

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