Spaniards Maintain Confidence in Deposits and Cash Despite Inflation

Spaniards continue to rely on deposits and cash despite the fact that they have lost purchasing power with these products due to high inflation. In 2022, inflation closed at 5.7%, although during the year it exceeded 10%. The lack of remuneration of deposits by banks and not moving cash means that this money has lost value. According to data from the Bank of Spain, Spanish households left a new historical maximum of €1.078 trillion in deposits and cash last year. This amount is 4.2% more than the previous year.

The economic uncertainty that stalked 2022, the year in which Russia’s invasion of Ukraine began and inflation started to soar, caused Spaniards to keep more money than ever before. The figure implies almost €44 billion more than that recorded in 2021. And it represents more than 40% of the total financial assets of households, which include other investment instruments such as insurance, pension funds, etc.

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According to the BdE’s Financial Accounts of the Spanish Economy, most of this money is in deposits

Spaniards keep a total of 1.02 trillion in these products (both transferable and others). In the case of transferable deposits, the total amount is €937,906 million, i.e. 6.6% more than a year earlier. The average remuneration of term deposits at the end of 2022 was 0.64%. In February, these products have improved, somewhat, their profitability, as the average was 0.86%, the maximum since 2014.

On the other hand, Spanish households kept less cash in 2022 than in previous years. The total amount was €57.55 billion, a drop of 4.2% compared to the previous year. This situation could be reversed in the coming quarters. As inflation is taking its toll on the savings of Spaniards. In addition, the lack of remuneration of deposits in this first quarter may cause this amount to fall, as Spaniards are taking this money to other products such as government bills or investment funds.

In 2022 as a whole, the net acquisition of financial assets by households amounted to 44,982 million euros. Only Mutual Funds (apart from bank accounts) recorded positive net financial transactions (net subscriptions), in the year-to-date, confirming this instrument as an investment reference for Spanish households, which accumulated €12.42 billion of new savings in Mutual Funds. In the last quarter alone, Spanish households opted for savings in Mutual Funds (€7.37 billion) as opposed to the notable acquisition of debt instruments, mainly short-term, which amounted to €5.2 billion.

Overall, the net financial wealth of households, which is obtained by deducting their liabilities from their financial assets, stood at €1.959 trillion at the end of 2022, down 0.2% from a year earlier, when it stood at €1.962 trillion.

The loans of Spaniards fell to €702,788 million, i.e., they fell by €1.42 million

Household financial wealth has remained stable despite high inflation, because Spaniards have reduced debt, in some cases by amortizing part of it and in others because access to financing became more expensive during 2022 due to the rise in interest rates by the European Central Bank. Thus, the loans of Spaniards fell to €702,788 million, i.e., they fell by €1.42 million.

If the last quarter of 2022 is taken into account, the total volume of financial assets increased by 2.8%, despite the fact that at the annual level it remained stable. Financial wealth also increased by 3.8%. According to Inverco, the increase in the total volume of financial assets in the fourth quarter originated 36% from new acquisitions of financial assets made by households, while the remaining 64% was due to market-driven portfolio revaluations.

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First published in EL INDEPENDIENTE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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