CBM, euro contribution up in August but lower against last year
Monetary statistics for August 2009 issued by the Central Bank of Malta show that the Maltese contribution to the euro area broad money stock (M3) increased by €15.1 million in August, compared to the previous month, reaching €8,622.4 million. This notwithstanding, the Maltese contribution to euro area M3 was 1.2 per cent lower than the year ago level. In the previous month the year-on-year decline was less pronounced at 0.9 per cent.
The narrow money (M1) component of the Maltese contribution increased by €43.0 million, or 1.0 per cent, during the month, driven by a rise in overnight deposits. These grew by €39.8 million, or 1.1 per cent, mostly on account of higher balances belonging to Maltese households. In contrast, overnight deposits belonging to other euro area residents declined. Meanwhile, currency issued expanded by €3.1 million, or 0.5per cent, in August. On an annual basis, the rate of growth of M1 climbed to 8.6 per cent from 7.1 per cent in July.
The rise in M1 led to an increase in the intermediate money (M2) component of €11.6 million, or 0.1 per cent, in August, despite a drop in short-term deposits. Thus, deposits with an agreed maturity of up to two years fell by €31.5 million, or 0.7 per cent, with the local resident category, particularly those of households, declining significantly. As a result, the year-on-year contraction in deposits with an agreed maturity of up to two years belonging to Maltese residents persisted, with a negative growth rate of -9.3 per cent in August, compared with -6.2 per cent in July. In contrast, deposits redeemable at up to three months’ notice rose marginally.
In aggregate, deposits belonging to local residents fell by €26.5 million in August. Consequently, their annual growth rate turned negative, dropping to -0.8per cent from a positive 0.2 per cent in July. This drop in residents’ deposits was partly due to the purchase of securities by households following a large primary issue of stocks by the Government during the month. However, as has been observed in recent months, the shift in resident deposits from short-term to overnight continued, demonstrating the fact that, in the prevailing environment of extremely low interest rates, the opportunity cost of holding the most liquid monetary assets is significantly reduced.
Credit to residents of Malta expanded by €69.6 million in August, with the increase being due to borrowing by the general government sector. This rose by €79.9 million, or 4.2 per cent, as MFI holdings of both Treasury Bills and Malta Government Stocks increased. In contrast, credit to other Maltese residents contracted by €10.3 million, or 0.1 per cent, though lending to households registered an increase. The contraction in credit to the corporate sector was observed across various sub-sectors, in particular, the wholesale & retail trade sub-sector, the real estate, renting & business activities sub-sector and the transport, storage & communications sub-sector. Lending to the household sector, mostly to finance house purchases, remained fairly buoyant, with an increase of 0.7 per cent on the previous month. On an annual basis, bank borrowing by Maltese residents rose to 11.9 per cent in August from 10.2 per cent in July. With credit to residents of other euro area Member States increasing by €60.9 million over the month the overall increase in credit to euro area residents climbed to €130.5 million in August.
