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Broad money (M3) contracted in October, shedding Lm6.4 million, or 0.2%. As a result, its annual growth rate continued to slow down, to 3.2% from 3.7% in September. With regard to the main counterparts of M3, domestic credit increased further, whereas the net foreign assets of the banking system declined slightly. Meanwhile, a rise in the other counterparts of M3 had a dampening effect on monetary growth.
Narrow money (M1) fell by Lm0.6 million, reflecting a slight drop in deposits withdrawable on demand, which was only partly offset by a marginal increase in currency in circulation. The demand for M1 has moderated in recent months, with the annual growth rate of M1 declining to 7.9% in October, compared with 8.5% in September.
Intermediate money (M2), which consists of M1 and short-term deposits apart from those withdrawable on demand, decreased by Lm6.4 million, or 0.2%, in October. Time deposits with an agreed maturity of up to 2 years contracted by Lm6.8 million, or 0.5%. On an annual basis they fell by 1.9%, compared with a drop of 1.5% in the twelve months to September.
Domestic credit expanded by Lm9 million, or 0.3%, in October. The annual rate of credit growth remained broadly unchanged at 12.5%. Net claims on central Government rose by Lm6.5 million, reflecting both an increase in bank holdings of Treasury bills and a drop in Government deposits with the Central Bank of Malta. On the other hand, a sizeable loan repayment in connection with the restructuring of the shipyards reduced net claims on central Government. Claims on other residents expanded by just Lm2.6 million, as further growth in loans for house purchases and to the construction sector was partly offset by a decline in credit to other sectors of private industry and public non-bank companies.
The net foreign assets of the banking system contracted by Lm1.6 million, or 0.1%. As a result, their annual growth rate dropped further to 4% in October, from 6.4% in the previous month. The net foreign assets of the Central Bank of Malta fell by Lm21.5 million, mainly as a result of net sales of foreign exchange to the rest of the banking system and the repayment of foreign currency reserve deposits to some foreign owned banks operating in Malta after these were exempted from reserve requirement obligations. Conversely, the net foreign assets of the rest of the banking system expanded by Lm19.9 million, with the deposit money banks accounting for most of the rise.
Other counterparts of M3 added Lm13.8 million, or 1.1%, mainly as a result of an increase in banks’ retained earnings and growth in deposits that are excluded from M3. |
