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Broad money (M3) increased marginally in April, rising by Lm3.2 million, or 0.1%, leaving its year-on-year growth rate unchanged at 7.2%. Monetary expansion during the month reflected higher credit to the non-bank private sector, but was restrained by the issue of bonds on the capital market. A rise in the net foreign assets of the banking system had no impact on monetary aggregates.
Narrow money (M1) contracted by Lm6.5 million, or 0.4%, in April, driven entirely by a drop in currency in circulation, which fell by Lm9.3 million, or 2.1%. The decline in the latter was dampened by a rise in deposits withdrawable on demand, which increased by Lm2.8 million, or 0.2%. As a result, the annual growth rate of M1 decelerated further, falling to -2.5% in April, from -1.7% in March.
Intermediate money (M2) went up by Lm3.2 million or 0.1% in April, as deposits with an agreed maturity of up to two years rose by Lm9.1 million. Deposits belonging to households continued to grow, offsetting a decline in those belonging to non-bank financial intermediaries. However, deposits redeemable at up to three months’ notice rose only marginally. Meanwhile, foreign currency deposits in M2 added Lm6.6 million in April, mainly driven by growth in corporate deposits.
As regards the counterparts of M3, domestic credit contracted by Lm14.2 million, or 0.5%, in April driven by lower net claims on central government. Consequently, the annual rate of credit growth slowed down to 9.8%, from 10.4% in March. The drop in net claims on central government, amounting to Lm22.9 million, or 5.2%, was mainly attributable to a sizeable increase in government deposits with the Central Bank of Malta. In contrast, claims on other residents increased by Lm8.7 million, or 0.3%, reflecting higher lending to the non-bank private sector, primarily to households – largely to finance house purchases – and to the ‘real estate, renting and business activities’ sector.
The net foreign assets of the banking system expanded by Lm9.3 million, or 0.5%, in April with a drop in the Central Bank of Malta’s net foreign assets being offset by an increase in those of the rest of the banking system. The annual growth rate decelerated significantly, falling from 16.0% in March to 4.0% in April. The deceleration was attributable to an exceptionally large share capital inflow into one bank, which had boosted the net foreign assets in April 2006. The monthly rise in net foreign assets stemmed from an increase in the net holdings of international banks, mainly on account of additions to their revaluation reserves and an increase in the equity capital of one bank.
The other counterparts of M3 dipped by Lm8.1 million, or 0.4%, in April as an increase in capital and reserves was outweighed by a drop in deposits excluded from broad money and a rise in other assets.
Definitions:
Narrow money (M1) includes currency in circulation, demand deposits and savings deposits withdrawable on demand.
Intermediate money (M2) comprises M1, savings deposits redeemable at notice and time deposits with an agreed maturity of up to and including two years.
Broad money (M3) comprises M2, banks’ repurchase agreements with the non-bank sector and banks’ debt securities issued with an agreed maturity of up to and including two years.
Further economic and monetary information can be obtained from the website of the Central Bank of Malta www.centralbankmalta.com |
