Economic statistics - 01.02.1986, Page 5

Monetary developments
Deposits in deposit money banks increased well in
excess of the rate of inflation. The increase was 48.9
per cent according to provisional figures, or 10 per
cent in real terms measured by the increase in the
credit terms index. Deposits increased as a ratio of
GDP for the seventh succesive year. The ratio was
29.9 per cent of GDP, compared to 27.5 per cent in
1984, 24.4 per cent in 1983 and 19.4 per cent in
1978, the lowest in decades. Financial savings in the
banking system has thus been increasing, not least
due to higher real interest rates on bank deposits.
General savings deposits increased most of the
three general catagories of deposits, or by 76 per
cent. Demand deposits increased by 27.6 per cent
and time deposits by only 14.8 per cent. This shift out
of time deposits into general savings deposit is partly
explained by the banks having begun to offer un-
blocked deposits with variable yields depending on
how long the deposit is untouched. The yield can
easily go well above the yield on 6 month indexed
savings accounts, if no withdrawals are made for 6-
18 months. This development is reflected in the
figures for the quantity of money. M1 (demand de-
posits and notes and coin in circulation) increased by
27.9 per cent, M2 (M1 and general savings deposits)
increased by 60.9 per cent and M3 (M2 and time de-
posits) increased by 47.2 per cent.
Lending and relending by the banking system, i.e.
the Central Bank and the DMBs, increased by 31.5
per cent, wich implies a decrease in real terms by 3
per cent. The increase in lending by the DMBs was
similar, or 29.9 per cent. This is a noticable change
from the strong credit expansion in 1984, when lend-
ing and relending by the banking system increased
by 20 per cent in real terms and lending by the DMBs
by 23 per cent. That strong credit expansion can
though partly be explained by the special circum-
stances at the end of 1984, because of strikes, big
wage increases and the devaluation. The rundown of
stocks in 1985 also deflate the lending figures by
decreasing produce loans. Lending excluding pro-
duce loans increased substantially, or by 45.5 per
cent, or slightly more than 7 per cent in real terms. It
is though still less than in 1984.
The liquidity position of the DMBs improved for the
first time since 1980, as deposits increased more
than lending. It improved by 115 m.kr. compared to a
deterioration by 1013 m.kr. in 1984. The liquidity po-
sition has been difficult in recent years. The end of
year figure bottomed in 1984, being negative by 8.1
per cent of deposits. At the end of 1985 it was nega-
tive by 5.2 per cent of deposits. The improvement in
the position of the DMBs is even more substantial in
terms of the total position towards the Central Bank
and abroad.
Monetary developments
Position
in millions Changes
of krónur'1 in millions
31/12 of krónur
Short-term foreign assets 1985 1984 1985
of the banking system, net2) 7816 -616 4757
Bank liquidity -1971 -1013 115
Central Bank claims on
Government, net3) 3128 309 2007
thereof T reasury (A-budget) 4129 -214 2873
Percentage changes
Central Bank base money 10546 29.1 24.6
Notes and coin in circulation 1219 24.5 29.0
Moneysupply(MI) 6750 42.5 27.9
Money supply and general
savings(M2) 30046 50.7 60.9
Money and quasi-money (M3) 39124 33.4 47.2
Time deposits (M3-M2) 9078 5.0 14.8
Lending by deposit money banks ; 38609 46.2 29.9
thereof repurchased by
Central Bank 447 38.5 -93.4
Other 38162 48.6 66.5
Domestic items of the banking
system, net 31308 38.9 29.7
Indexofcredit terms 18.9 35.6
1) Provisional. 2) Excluding book keeping adjustements for
exchange rate changes.3) Excluding foreign funds relent and
deposits on domestic foreign-currency accounts.