Interest rates favor savings in lek - BoA: Deposits in local currency increase by 13.5%. Time deposits exceed half of the total
Albanians' savings in banks are growing, while interest rates are playing an increasingly important role in how citizens choose to hold their money. Bank of Albania data shows that private sector deposits have continued their upward trajectory during the second quarter of the year.
One of the most important developments is the difference between the interest rates that banks offer on deposits in lek and those in euros.
For new time deposits, the average interest rate in lek is around 1.7%, remaining at the same level as the previous quarter. While for deposits in euro, the average interest rate is around 1.4%. So, citizens who choose to save in lek currently benefit from a slightly higher interest rate compared to those who place their money in euro deposits.
This difference between interest rates has been increasing over the recent period. According to the Bank of Albania, the margin between interest rates for deposits in lek and euro has widened to around 0.4 percentage points.
Simply put, banks are providing a somewhat greater incentive for savings in the local currency. And this seems to be reflected in the behavior of depositors.
Deposits in lek have increased by about 13.5% in one year, while deposits in foreign currency have recorded a slower growth, about 10.5%. This shows that savings in the local currency are gaining importance.
But it's not just interest that is having an impact. The growth in deposits is also linked to increased income and economic activity, while the inflow of foreign currency into the country, especially from tourism, has influenced the growth of foreign currency savings.
Individuals are also saving more. Their deposits have increased by about 10% compared to a year ago. At the same time, the way citizens hold this money is also changing.
An increasing share of savings is moving into time deposits, where money is left in the bank for a certain period in exchange for interest. Today, these deposits account for more than half of total deposits.
This is important because it shows that citizens are not keeping their money only for immediate expenses. Some of them are preferring to place their savings in banks for a longer period, also benefiting from interest.
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