The household sector made up about 75% of total deposits at banks in December 2016, according to the Central Bank of Egypt (CBE).
The CBE said in a recent report that total bank deposits stood at about EGP 2.761tn at the end of December 2016, compared to about EGP 2.714tn at the end of November 2016. Bank deposits registered an increase of about EGP 46.6bn, with an increase in the growth rate of 41.66% at the end of December compared to the previous month.
The report noted that this rate drops to about 20.75% when the impact of the flotation of the exchange rate that occurred on 3 November 2016 is being excluded in calculations.
The total household sector’s deposits in banks amounted to about EGP 1.7tn, including 1.266tn in local currency and the equivalent of about EGP 433.3bn in foreign currency, according to the CBE.
The household sector accounts for about 78.6% of total deposits in local currency and about 66% of total deposits in foreign currencies.
Tamer Yousef, head of the treasury sector at a foreign bank operating in the domestic market, said that the household sector only includes individuals.
He added that the private business sector owns the second largest deposits in banks, which includes all private companies and non-profit companies operating in the domestic market.
The private business sector’s deposits recorded EGP 487.633bn, of which about 299.572bn is in local currency and the equivalent of EGP 188.061bn in foreign currencies.
The public business sector’s deposits in banks reached EGP 81.036bn, of which about 45.869bn is in local currency and the equivalent of EGP 35.167bn in foreign currencies.
According to the CBE, this sector includes all public companies whether they are subject to Law 203 of 1991 or not.
Additionally, there are the government deposits recording about EGP 475.9bn, of which 279.53bn is in local currency and the equivalent of EGP 196.41bn in foreign currencies.
The savings of non-residents reached about EGP 17.98bn, of which 10.276bn is in local currency and the equivalent of EGP 7.701bn in foreign currencies.
According to Yousef, it is very normal that individuals’ share in deposits is higher than companies, whether public or private.
He explained that companies only put some of their liquidity in banks for other reasons but saving. In other words, corporate savings in banks are temporary, unlike those of individuals.
“This is the case in all countries worldwide. Actually, the household sector in Egypt has one of the world’s lowest savings rates, due to the decline of the middle class, compared to other countries,” according to Yousef.
He added that the savings rate in Egypt is estimated at only about 10% of GDP. It is a very low rate, and it should increase to at least 30%, as to achieve annual growth rate of 6%.
Daily News Egypt asked Yousef about the criticism over the increase of the household sector’s deposits in banks without using them in economic activities. He replied that this policy may be intended and serves the goals of the current monetary policy.
He explained that the increase of household sector’s savings reflects a decline in consumption, which reduces the demand for imported products as well as the demand for foreign exchange.
He added that banks may cut their interest rates in the coming period to direct those savings to other economic activities, including investing in the stock market.
Yousef believes that individuals still prefer bank savings because they represent a secured investment with semi-stable returns for long periods.
In terms of preference, bank savings are followed by investment in the real estate sector, gold, and the stock market, according to Yousef.
He stressed that the banks aim to increase their household sector’s savings because they allow banks to grant more loans to various economic sectors and individuals.