For the first time in history, Maltese families hold nearly €15 billion in bank deposits. This, despite the veritable frontal attack on Malta’s society and economy caused by the pandemic, which analysts had predicted will lead to 50,000 unemployed Maltese and the collapse of our economy.
At the end of 2019, Maltese households had deposited with banks the sum of €13.1 billion. This was equivalent to 96% of GDP. This was a huge rise over the €7.6 billion in deposits they had in 2012. It in fact marked an increase of €5.5 billion in seven years.
In the seven years before 2012, the rise in household bank deposits had been of just €2.4 billion, or less than half as much.
Many had expected this unparalleled rise in household wealth would be unravelled by the pandemic. After all in 2009, household bank deposits had fallen after the 2008 financial crisis, which was a much smaller economic shock than the pandemic. But as the months passed, families continued to deposit more and more money with banks.
In the seven years before 2012, the rise in household bank deposits had been of just €2.4 billion, or less than half as much.
Workers were shielded by the wage supplement. Pensioners and families with children were given record increases. After rising for some months, unemployment took a sharp turn downwards. Employment started to rise again, even in sectors like retail and restaurants which in the first months were thought to be doomed.
As a result, by end 2020, household bank deposits had risen to €14.3 billion; the largest year-on-year increase in household savings recorded in our nation’s history.
Bank of Valletta reported a €25.9 million profit before tax while HSBC saw their profits rise to €17.5 million. This marks an improvement of nearly 50% over the same period of 2020.
In one year, households increased their bank balances by more than they had during the whole 5-year legislature between March 2008 and March 2013.
Savings continued after restrictions were eased
Some may think that this simply reflected the fact that for several months the Maltese were unable to consume part of their income as shops, restaurants and hotels were closed. However, the rise in saving was not concentrated just in the initial months of lockdown but was spread also in other months where there were not that many restrictions.
Furthermore, the first six months of 2021 also saw household bank deposits grow very strongly. They rose by €709 million, as against the €719 million rise observed in the same period of 2020. This suggests that 2021 could prove to be another record in terms of household saving. At this rate, household bank deposits with local banks will have reached €15.4 billion by the end of this year, effectively double the amount in 2012.
The fact that despite a pandemic, household bank deposits will have doubled in less than a decade is testament that the economic prosperity created by the post-2013 Labour administration benefitted families greatly. Bolstered by this financial cushion, Maltese families can play an active part in the building of a new prosperity.
