Deposits increased in the Balkans as consumers are spending less and postponing big investments.
By Jonilda Koci for Southeast European Times in Tirana -- 03/09/12
Many in the region are increasing their savings in light of the economic crisis. [Reuters]
Balkan consumers' response to the ongoing economic crisis is to spend less and save more. The drop in income, loss of jobs and other effects of the crisis have led Balkan consumers to reduce consumption in their daily expenses, personal investments and higher-priced goods.
Albanians' purchasing fell significantly, by 22.5 percent just since June. Eduard Zaloshnja, an economist at the US-based Pacific Institute for Research and Evaluation, said that the retail volume index published by INSTAT, the official Albanian statistics provider, indicates that consumers are cutting way back on spending.
"The index stood at 207 percent on January 1st 2011, and ended the year at 190.9 percent. The index plunged during the first quarter of 2012 to 148 percent," he told SETimes.
Deniz Deralla, head of the Credins Bank credit division, said people are now trying to save money rather than spending or investing. "Saving is a sign of lack of people's safety due to political developments, difficulties of government to pay back duties, and crisis in our neighbour countries," he told SETimes.
Total deposits increased in June by 10.4 percent in Albania, compared to same period last year, a trend that started two years ago when signs of crises began to spread in the country. "There is a strong tendency to save; the pace of increase of savings in banks is notably higher than economic growth pace," Elvin Meka, a banker and professor of economy, told SETimes.
Francesko Çollaku, who owns a pizzeria in Tirana, said fewer people are dining out compared to last year. "People are spending less. It is really tough if people are even saving money on pizza, which is not such an expensive selection of meal," he told SETimes.
The trend seems to be across the board in the region.
Savings increased by 12 percent, and loans decreased by about 1 percent, based on the latest statistical data from the National Bank of Romania. The trend shows the immobility of money, which decreases consumption and economic development, according to the Central Bank.
A Consumer Confidence Barometer, conducted by GfK and published in June, shows that despite the 87 percent of the population that said they had a higher income compared with the same period of 2011, only 18 percent plan to invest in home repairs, and only 6 percent will buy a home.
"Savings and a so to say adjusted way of living kept me going through the crisis. If there's one thing austerity has taught me is to moderate my day-to-day expenses and tune my life to the rhythm of the times we are going through. And I know that many have done the same and look over their shoulder and see that as a useful life experience," Alexandru Pricop, a 43-year-old civil servant from Bucharest, told SETimes.
Total deposits increased in June by 10.4 percent in Albania. [Reuters]
Cutting expenditures and postponing investments is also becoming the norm for businesses. "Small and medium companies cut [their expenses] dramatically. Savings are smaller and investment projects are frequently postponed or cancelled," Gabriela Nicolau, an economist at accounting company SC Gen Personal, told SETimes.
Montenegrin citizens are also depositing their money. At the end of April, savings totals were more than 1 billion euros -- 9.1 percent higher compared to the same month last year, according to data from the finance ministry. According to the Central Bank of Montenegro, deposits in early 2010 amounted to 600 million euros, about half of the current total.
Roughly 30 percent of the amount is from is citizen deposits, and 70 percent are term deposits.
"This means that every citizen has an average of about 800 euros on his account," the bank said.
Household deposits increased by 28 percent in Serbia from January to May. But the increase does not mean that citizens are not investing.
"The safest way for citizens is to invest in real estate because their prices, for sure, are going to increase after the recession," Milos Kastratovic, the director of the Institute for Business Value, told SETimes.
The real estate sector is also seen as a safe bet in Macedonia. Jovanka Popovska, a 49-year-old business woman, is planning to buy a new apartment in Skopje. "If you invest on the market, you will probably lose, because the value of the stocks decreases everyday. The price of housing in the capital is the same for years. You can also rent it and make some return of the money," Popovska told SETimes.
The figures support her fears. The economic crisis has a negative influence on the price of the stocks offered at Macedonian Stock Exchange. The exchange's main index MBI 10, which registers the value of the 10 most traded stocks on the market, has lost approximately 20 percent of its value in the past year.
"The total trading volume this year was valued less then 40 million euros. In comparison, same time last year we had trading volume with the value of almost 100 million euros," Ivan Shteriev, the director of Macedonian Stock Exchange, told SETimes.
Although the economical crisis is shaking up Bosnia and Herzegovina (BiH), and salaries and pensions haven't changed in years despite the ever higher costs of life, citizens are still able to be thrifty. In the first quarter of this year, savings went up 10 percent compared to last year.
''This means that every citizen of BiH had around [770 euros] in their accounts at the end of April, which for a four member family means a saving of around [3,000 euros]," the BiH Central Bank said.
While most citizens are able to save, a large number of them keep their savings at home, due to lack of trust in banks.
"My wife and I keep our savings at home. They are not large sums of money, but in time when money is lacking, any kind of savings is a success. Banks are not stable, the money market is risky and a lot of my friends do not save their money in the bank," Enver Jahić, a pensioner in Sarajevo, told SETimes.
SETimes correspondents Bedrana Kaletovic in Sarajevo, Biljana Lajmanovska and Marina Stojanovska in Skopje, Paul Ciocoiu and Gabriel Petrescu in Bucharest, Drazen Remikovic in Podgorica, Ivana Jovanovic and Bojana Milovanovic in Belgrade contributed to this article.