"The smaller growth in deposits was probably driven largely by the relaxation of coronavirus restrictions at the start of May, which facilitated consumption," central bank economist Raido Kraavik said.

He added that bank deposits have grown rapidly throughout the whole of the pandemic. "Household deposits have increased by 16 percent over the past year to total more than €10 billion. Deposits have also grown rapidly in other countries, but the increase in Estonia has been faster than the average in the European Union," Kraavik said.

The economist said the growth in deposits has been pushed by forced saving.

"This occurred because various normal expenses have not been possible while travel and many forms of entertainment and leisure have been restricted, and while the temporary closure of shopping centers reduced the opportunities for shopping," he added.

Kraavik noted that, on top of the forced saving, the pension reform has already increased deposits in the first half of this year as people of retirement age or close to it were able to take their money out of the second pension pillar if they wanted to.

"The relaxation of the pandemic restrictions in May this year slowed the growth in deposits as it did last spring. This indicates the relatively rapid recovery in the consumption of goods and services as the restrictions are eased. It can be expected that if there are no new restrictions, deposits in banks will increase by less during the summer months," the economist said.

Kraavik said substantial additional growth in deposits is expected in September when large payouts are made to those exiting the second pension pillar.

"The bank deposits of Estonian companies have grown very rapidly, increasing by 17 percent over the past year to total €8.7 billion. The cause of the strong growth was a large increase in deposits in one month at the end of last year," the economist said.

"The amount of money deposited by companies in banks has remained quite stable in the first months of this year, partly because of the recovery in corporate investment activity. The yearly growth in corporate deposits has also been fast elsewhere in the European Union. The support measures from governments to help companies during the pandemic have made a substantial contribution to this in some countries," he added.

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