As in other Eurozone countries, the coronavirus lockdown in Greece led to a paradoxically sharp increase in household deposits at a time of markedly lower economic activity. According to figures released by the Bank of Greece and the European Central Bank, private deposits in Greece and the Eurozone in July increased at rates of 9.5 pct and 10.3 pct, respectively, which were the highest recorded in more than a decade.
This was partly explained by the measures to support the economy taken by Greece and other European governments, measures taken by the ECB to boost liquidity but also to a large extent by a reduction in consumption by households as whole sectors of the service economy shut down and businesses put off planned investments.
To a great extent, households and businesses increased their liquidity through an increase in bank deposits that can be quickly withdrawn. These can serve as a support to businesses and households in meeting their obligations to the state and banks that were suspended during the lockdown or help increase their sense of security. They may also be used to finance a spike in consumption or investments. To the degree that the latter takes place, this is expected to boost the recovery of the economy seen after the lifting of the lockdown in Greece and the Eurozone.
The figures show a roughly uniform increase of deposits in absolute figures compared with a year earlier but the percentage increase was greater for businesses that had a significantly smaller share of total private deposits. Household deposits in July increased by 6 pct, whereas the equivalent percentage increase in the Eurozone was 7.4 pct.
The increase in short-term deposits (demand deposit and savings account) was partly offset by a decrease in interest-paying long-term deposits, with the former increasing by 511 million euros and 579 million euros, respectively, and the latter decreasing by 421 million euros. This also tracked developments in the Eurozone.
Greek businesses increased their deposits at an annual rate of 28.7 pct in Greece, reflecting both a suspension of their obligations to the state and banks and measures for their support, such as state-guaranteed loans. Loans to businesses have increased steadily, reaching 6.5 pct on an annual basis in July, according to the Bank of Greece. Businesses increased their short-term deposits by approximately 1.4 billion euros and their fixed-term deposits by 1.1 billion euros.