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Prospects Daily: Bank deposits are moving out of riskier European countries

Important developments today:

1. Bank deposits are moving out of riskier European countries.

Bank deposits are moving out of riskier European countries. In the current crisis, customers are taking their money out of banks in Greece, Italy, and Spain to move them to relatively safer European nations such as Germany. In Greece, bank capital flight to other European countries seems to be accelerating. At the end of December, the country’s total bank deposits stood at €169 billion ($225 billion), down by 28% from the peak in June 2009, according to data compiled by Bloomberg. Bank deposits slumped 5% in Spain from July to November to €934 billion, the lowest level since April 2008, and Italy’s total deposits stood at €974 billion in November, the least in 18 months. Bank capital flight in Spain and Italy was mostly due to decline in large wholesale deposits as European multinational companies are minimizing bank deposits in the most-affected nations; it might also highlight the relatively flighty nature of corporate deposits compared to retail funding. In contrast, Germany’s deposits have risen by nearly 10% since May 2010 and reached €2.15 trillion at the end of 2011—the mirror image of the movements out of Greece and other struggling countries.

Among Emerging Market

In Europe and Central Asia, Turkey’s real sector confidence surged nearly 4 points in February to 109.1, as manufacturers were more optimistic about future orders after the central bank reduced borrowing costs by 100 basis points in a move to support growth. However, the seasonally adjusted capacity utilization rate for manufacturing dipped to 75.8% reflecting the ongoing economic slowdown. 

In the Middle East and North Africa, Morocco’s consumer price inflation held at a low of 0.9% year-on-year (y/y) in January, slightly higher than the rate for the full year 2011, as weak demand and extensive state subsidies (equivalent to more than 5% of GDP) for energy products and staples such as food and sugar held down prices. 

In Sub-Saharan Africa, South Africa’s producer price inflation decelerated to 8.9% (y/y) in January from 9.8% in December, reflecting falling grain prices after a bumper maize crop.

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