Here you can get more than 30% savings interest

A savings interest of 30% sounds like music to the ears of many Dutch people. In Argentina, however, this very high savings rate hides a considerable economic malaise.

ABN Amro is the first of the major Dutch banks to lower interest rates to 0%. That's mostly a symbolic move, as the rate stood at 0,01%. It has been more than five years ago that you could still get 1% interest on your savings.

In our neighboring countries, the interest on savings has also almost reached zero, but outside Europe this compensation is often considerably higher. In the United States, for example, it takes some effort to find a savings account with more than 1,5% interest. But Argentina takes the cake. There the savings interest is more than 30%.

Long lines in front of the bank
In the autumn of last year, Argentine interest rates even approached 60%. As you might imagine, there were long queues in front of many banks at the time. However, people did not come to deposit money, but rather to withdraw. Interest rates were so high because the country is struggling with major economic problems.

The national debt has skyrocketed from less than 40% in 2011 to almost 90% in 2018. The annoying thing is that the country has issued many loans in dollars, while the government has (tax) income in pesos. As a result, many more dollars for interest payments are flowing out of the country than coming in.

Peso is almost worthless
In the past two years, the peso has fallen about 70% against the dollar. To prevent the currency from becoming completely worthless, the Argentine central bank has raised interest rates further and further. Foreign goods are becoming more and more expensive in Argentina due to the free fall of the peso. As a result, inflation has been above 50% for a year now.

A savings interest of 30% is a lot less attractive if you can buy a lot less with the final amount than now. Unfortunately, this also applies to the Dutch saver. He will soon no longer receive compensation for his money and meanwhile sees consumer prices rising faster and faster. According to the CBS, last year's 2,6% price increase was the largest since 2002.
 
Advantage of low interest rates
Although inflation is well above the European Central Bank's target level (just under 2%), we should not hope for an interest rate hike for the time being. This is because countries such as Italy (0,6%), Spain (0,7%) and Portugal (0,4%) significantly lower the European average. However, the low European interest rate also has an advantage for the Netherlands. Over the past XNUMX months, the euro has fallen a few percent against many other currencies.

This improves the international competitive position and stimulates export growth. That is one of the reasons why the Dutch economy is now doing well and unemployment is very low. Although a higher savings interest rate is not an option for the time being, it would of course be nice if workers could benefit more from it in the future through higher wages or lower taxes.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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