There was another mini-run in the first quarter of this year when there were rumours that deposits would be peso-ised. Since then, however, the banks have started to regain deposits. In the second quarter, they increase deposits by US$425m. This, however, is dust beside the loss of almost US$7bn in deposits in the first half of 2002.
Deposits at private sector banks now stand at US$7.7bn, according to central bank figures. Worryingly, however, the bulk of the deposits are short term. This mismatch means that banks have to be very careful in how they use the deposits to fund the asset side of their balance sheets. Currently, 60% of the banks' deposits are call money: in 2001, only 35% of the banks' deposits had a maturity of less than 30 days. The other big change is that foreigners' deposits, which used to account for two-thirds of the total, are down to about a third.
Banks are not lending, so the productive part of the economy will take longer to recover. They are mostly lending to other banks or their parents. Such caution is warranted: around 25% of the banks' loan portfolios are non-performing.
* IMF Making progress. The IMF is bullish on the country's prospects, arguing that a full recovery is not far off. The country has been in recession since 1999 and is likely to see its economy contract by about 3% this year. This is better than the 11% contraction of 2002. The IMF expects the economy to have picked up in the second quarter, with stronger growth than the 0.5% registered in the first quarter.
End of preview - This article contains approximately 339 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
