Monetary trends in the Republic of Belarus in January-August 2010
1. Balance of goods and services and foreign exchange market
In January-July 2010, the balance of external trade in energy goods dropped USD 0.7 billion as against the similar period of the previous year, whereas the balance of external trade in non-energy goods rose USD 0.9 billion. 79.7 percent out of the above rise of the external trade in non-energy goods were due to a 2.4-fold growth of potassium fertilizer exports in terms of value.
The decrease in inflation and devaluation expectations had a positive effect on a positive balance in the currency market cash segment. In January-August 2010, the population sold USD 62.3 million on a net basis, whereas the January-August 2009 population foreign currency purchases made up USD 918.2 million.
As of September 2010, the cost of currency basket made BYR 1 042.81 having increased against the beginning of the current year by 0.6 percent with the established corridor of possible currency basket cost fluctuations ± 10 percent. It is worth mentioning that from January 1 to September 1, 2010 mutual exchange rate fluctuations of world currencies resulted in the weakening of BYR rate in relation to USD at the rate of 5.2 percent to BYR 3012 for USD 1, to the Russian rouble (RUB) – 3.8 percent to BYR 98.23 for RUB 1, and strengthened against Euro by 6.7 percent to BYR 3832.77 for EUR 1.
In this regard, January-August 2010 saw the price competitiveness of Belarusian exports maintained. The January-August 2010 BYR real effective exchange rate dropped 7.97 percent as against 2009, the BYR real effective exchange rate to RUB fell 12.65 percent.
2. Monetary overview
2.1.1. As of September 1, 2010, rouble money supply (money aggregate M2*) upped 21.1 percent (BYR 4.37 trillion) (the money supply fell 12.2 percent for the period of January-August 2010) to BYR 25.1 trillion (see Figure 2.1). The annual dynamics of the money aggregate could be characterised by a 9.3 percent (BYR 1.93 trillion) decrease in January 2010 and a further increase by 33.5 percent or BYR 6.3 trillion in February-August 2010.
August 2010 saw the rouble money supply grow 0.1 percent (BYR 19.4 billion) (2.1 percent for August 2009) (see Figure 2.1). The major share (76.6 percent) of the August rouble money supply growth was formed at the expense of the active rouble money supply.
Fig 2.1 Money aggregate M2* growth (as against previous year)
An average annual pace of monetary aggregate M1* circulation for the period from September 1, 2009 to September 1, 2010 fell 1.04 percent. Alongside with that, the above indicator dropped from 7.23 percent to 7.68 turn-rounds in August 2010 as against December 2009.
Active rouble money supply (monetary aggregate M1*) grew 5.7 percent or BYR 0.64 trln. (see Fig. 2.2) for January-August, 2010 as against the January-August, 2009 when the money supply decline was at the rate of 14.3 percent.
In January-August 2010, cash in circulation grew 27.1 percent, transferable deposits of natural persons – 26.7 percent (see Figure 2.2). For the period of January-August 2009, cash in circulation dropped 8.4 percent; transferable deposits of natural persons grew 0.5 percent.
In August 2010, cash in circulation included in the money supply grew 1 percent (by BYR 43 billion); transferable deposits of natural persons fell 7.2 percent (by BYR 206.6 billion), legal persons’ transferable deposits dropped 11.6 percent of BYR 615.6 billion.
As of September 1, 2010 rouble deposits were equal to BYR 19.35 trillion having increased for the period of January-August 2010 to 16.9 percent (BYR 2.8 trillion) as against January-August 2009 when they had dropped 15.1 percent.
Natural persons’ rouble deposits increased 34.4 percent or BYR 2.76 trillion for the period of January-August 2010 (for January-August 2009 they dropped 8.9 percent). The major share (75.2) of the natural persons’ rouble deposits was accounted for time deposits which grew 37.2 percent (or BYR 2.2 trillion) for January-August 2010. The increase was due to savings made in the national currency were very attractive.
Legal entities’ rouble deposits grew 0.5 percent or BYR 44.2 billion in January-August 2010. The deposits included transferable deposits of legal entities which dropped 16.3 percent (or BYR 0.91 trillion), and time rouble deposits of legal entities which rose 32.4 percent (or BYR 0.95 trillion).
Deposits made in foreign currency in dollar equivalent increased by 4.4 percent or by USD 252 million. As of September 1, 2010, the major share (62.2 percent) in foreign currency deposits belonged to natural persons’ savings, and the major share in terms of the deposit increase from the beginning of the year – legal entities’ funds – 62.3 percent. Natural person’s deposits made in foreign currency grew 3.9 percent (USD 139.9 million), legal entities’ foreign currency deposits rose 5.3 percent (USD 112 million). At the same time, the share of foreign currency deposits in total natural person’s deposits for January-August 2010 dropped 5.1 percent and as of September 1, 2010 amounted to 50.7 percent (57.6 percent as of September 1, 2009) with a simultaneous increase in rouble-denominated deposits.
As of September 1, 2010, the major part (94.4 percent) of foreign currency deposits of natural persons’ was accounted for time deposits which were growing much more faster (1.9 percent or USD 64.2 million) in January-August 2010 as against time rouble-denominated deposits of population which was connected with their lower profitability as compared to rouble-denominated deposits.
In August of the current year, natural persons’ foreign currency deposits grew 1.1 percent (by USD 41.2 million). Legal entities’ foreign currency deposits shrank 2.2 percent (USD 50.9 million).
* Other sectors – other financial institutions, non-financial organizations, natural persons. The previous surveys used the term “requirements to the economy”. The alterations are connected with the transition to the standard of presentation of analytical data on monetary statistics developed by the International Monetary Fund.
In January-August 2010, an increase in NFABS made up 21.1 percent as a result of a 20.7 percent increase in banking requirements to the economy; NDABS dropped USD 127.4 million (4.6 percent) to USD 2.67 billion as of September 1, 2010. The above changes occurred due to the National Bank net foreign asset rise. The decrease in net foreign asset of banks was connected with the growth of funds attracted by banks from non-Belarusian entities and the shrinkage of deposits made by non-Belarusian entities
International reserve assets of the Republic of Belarus as of September 1, 2010:
In January-August 2010, the National Bank reduced the refinancing rate five times by 0.5 percentage point each time having set it at the level of 11 percent per annum. At the same time, reduction was seen in the rates of permanently available and bilateral transactions for liquidity support – by 4.5 percentage points – from 21.5 percent per annum to 17 percent per annum. Interest rates of permanently available transitions for liquidity withdrawal dropped by 2.5 percentage points – from 9.5 percent per annum to 7 percent per annum. September 15, 2010 witnessed the refinancing rate also reduced by 0.5 percentage points to 10.5 percent per annum, rates of permanently available and bilateral transactions for banking liquidity support – to 16 percent per annum.
Interest rates of permanently available transactions for liquidity regulation were setting the interest rate fluctuation corridor in the organized interbank credit market. Within the set corridor, the interest rates were being smoothed out by auction liquidity regulation transactions carried out by the National Bank. Alongside with that, the National Bank was smoothly reducing the auction transaction interest rates for liquidity support which resulted in the interest rates decrease in the rouble-denominated interbank credit market.
Figure 3.1. Dynamics of rates on liquidity control instruments and interbank offered rates
Real interest rates on amount outstanding on operations to provide liquidity in the open market (Lombard auction) fell from 19 percent per annum in January 2010 to 11.4 percent per annum in August.
On the whole, the January-August 2010 situation in monetary markets could be characterised by liquidity deficit, the situation which was taking place during May-August – by excess liquidity.
For the same period, with a view to ensure a sound payment process, smooth interest rate fluctuations in the interbank credit market, the National Bank was rendering the necessary resource support to banks. An average daily outstanding debts on the banking system current liquidity support transactions totaled BYR 1 203.4 billion in January-April 2010. Average daily balance of bank funds allocated with the National Bank through liquidity withdrawal transactions amounted to BYR 871.5 billion.
As a result, a decrease occurred in the rouble interbank credit market interest rates. A weighted average interest rate on one-day interbank credit denominated in BYR was at the level of 9.9 percent per annum which indicated an 8.3 percent drop as against the January indicator (see Figure 3.1).
Measures taken by the National Bank in the interest rate policy determined the interest rate reduction in deposit and credit markets.
3.2 Deposit market rates. The new time rouble deposit rates in August 2010 were 11 percent per annum which indicated a 6.7 percent decrease as against January 2010. At the same time, the rates on new rouble-denominated time deposits made 16.2 percent per annum in August 2010 as against 21.2 percent per annum in January 2010 (see Figure 3.2).
Figure 3.2. Dynamics of rates on new rouble time deposits
The rates on newly issued time deposits of legal entities shrank 16.4 percent in January 2010 to 9.2 percent in 2010.
The interest rate on newly issued time deposits of natural persons denominated in foreign currency fell from 8 to 6.8 percent per annum respectively.
3.3. Credit market rates. An average stated interest rate on bank loans denominated in Belarusian roubles2 was 14.5 percent in August 2010, which indicated a 6.0 percent drop as against January 2010 (see Figure 3.3).
Figure 3.3. Dynamics of rates on newly issued rouble-denominated loans
The stated interest rate on newly issued credits for legal entitles made 14.1 percent per annum in August 2010 which indicated a 6.5 percent per annum decrease as against January 2010; the rate for natural persons were 16.9 percent (a 2.9 percent drop).
The average stated interest rate on newly issued freely convertible currency credits for legal entitles fell by 2.7 percentage points to 9 percent per annum in August 2010 as against January 2010.
In August 2010, 27 banks and 14 non-banking equity market participants were allowed to enter equity derivatives market.
Total volume of biddings on the equity derivatives market held by Joint-Stock Company “Belarusian Currency and Stock Exchange” in January-August 2010 made BYR 11.03 trillion. This was BYR 12.4 trillion less than the level of January- August 2009 and was primarily connected with the drop of government security transactions upon REPO due to the improvement of banking sector liquidity.
The average profitability of government bond secondary market on terms “upon redemption” 4 for January-August 2010 was at the level of 14.4 percent per annum having increased by 4 percentage points as against January-August 2009.
5. Banking economy sector
Amid financial and economic conditions formed as a result of aggravation of the situation on foreign markets, banks were maintaining the volume of assets which were enough not only to cover all own risks, but to sustain the banking sector attractiveness. The trend of normative capital of banks was preserved. For the period of January-August 2010 the volume of the normative capital of banks grew 10. 1 percent or BYR 1.36 trillion and made BYR 14. 76 trillion as of September 1, 2010. As of September 1, 2010, the profitability of banking system normative capital made 10.93 percent having increased by 2 percentage points as against the beginning of the year 2010 year on year.
Banks’ authorised fund made BYR 9.54 trillion as of September 1, 2010 and grew 3.1 percent (by BYR 294.2 billion) for January-August 2010. As of September 1, 2010 the ratio of authorised fund to the GDP grew to 6.28 percent year on year (see Figure 5.1).
Figure 5.1 Certain banking sector Figure 5.2 Dynamics of bank cash assets
5.2 Active bank operations. In January-August 2010 banking assets continue to grow (see Image 5.2).
The ratio of the average value of assets to the GDP y/y made 57.8 percent which pointed at an increase at the rate of 4.4 percentage points.
As of September 1, 2010, the share of requirements 5 to Belarusian economic entities in the asset structure made up 58.8 percent. Significant funds were allocated for natural persons’ crediting.
Figure 5.3 Bank asset profile
For January-August 2010, bank requirements to the economy grew 20.7 percent or BYR 13.73 trillion, and made BYR 80.11 trillion as of September 1, 2010 (for January-August 2009 they upped 26.6 percent, BYR 12.54 trillion and BYR 59.65 trillion) (see Figure 5.3).
An average growth of bank requirements to the economy in the national currency and in foreign currency in physical terms for January-August 2010 as against January-August 2009 made up 21.6 percent (denominated in BYR – 31.4 percent) with a 6.1 percent real GDP growth.
There was one past due (void) payment to the amount of BYR 2.7 billion during the accounting period.