Rising prices start cutting into Estonians' savings
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Loading... - Rehema Abbas
- 31 Oct 2022
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Swedbank believes economic growth will remain at 0.5 percent of GDP this year and fall to zero in 2023.
Inflation is currently over 20 percent and has been for most of the year which has reduced customers' purchasing power.
Swedbank's senior economist Liis Elmik said it will take several years to recover from the fall.
"According to our calculations, we will only reach last year's living standards in five years' time," she told Tuesday's "Aktuaalne kaamera".
While prices have risen, consumption has not yet fallen. The economic situation is now causing consumers to dip into their savings.
Data from the Bank of Estonia shows that while Estonian savings accounts have been growing for the past decade, they have been receding since May.
"During the pandemic, deposits grew very rapidly, but now we can see that over the summer months deposits in Estonia have fallen by €50 million. Although this is a big number, in percentage terms it is only 0.5 percent," said Elmik.
Bank of Estonia economist Taavi Raudsaar said with vital expenditure rising, people have less money to spend elsewhere.
"For a while, this can be compensated, so to speak, by savings accumulated in the past. But given that many people in Estonia do not have a lot of savings, sooner or later private consumption expenditure will also start to decline," he told AK. Read More...
