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EAnnual rate of growth of narrow money falls to 8.1%
Broad money, M3, which consists of currency in circulation
and residents’ deposits with the banking system, expanded
by Lm20.7m, or 0.8 per cent, in October. As a result, the annual
rate of growth of M3 accelerated by more than half a percentage
point to 5.6 per cent.
Monetary expansion during the month was driven by an increase
in domestic credit and by growth in the net foreign assets of
the deposit money banks.
Narrow money fell by Lm4.6m, with the annual rate of growth
falling to 8.1 per cent as a result. Demand deposits, mainly
those belonging to the corporate sector, contracted by Lm4.8m
and accounted for the entire drop. Currency in circulation increased
marginally.
Quasi-money rebounded during the month, expanding by Lm25.3m,
or 1.3 per cent, after having declined in the two previous months.
Savings deposits added Lm4m as corporate deposits rose, while
time deposits expanded by Lm21.3m, or 1.7 per cent, as increases
in corporate deposits and in those belonging to public sector
enterprises outweighed a drop in deposits belonging to households.
The main determinant of monetary growth was domestic credit
which expanded by Lm9.6m, or 0.4 per cent, during the month.
Consequently, the annual rate of credit growth rose by over
half a percentage point to 8.9 per cent. Net claims on government,
which rose by Lm27.9m as banks increased their holdings of government
securities, accounted for the entire addition.
In contrast, claims on the private and parastatal sectors contracted
during the month, by Lm18.3m, or one per cent. Bank lending
to public sector enterprises fell by Lm7.9m, or 3.2 per cent,
partly as a result of write-offs. At the same time, claims on
the private sector dropped by Lm10.4m, or 0.7 per cent, with
lending to most major categories of
borrower declining. The drop may reflect the issue of capital
market instruments by two private firms as well as increased
loan repayments.
With regard to the other main determinant of monetary growth,
the net foreign assets of the banking system, these dropped
by Lm10.1m. However, most of the contraction took place in the
net foreign assets of the international banks and had no impact
on monetary aggregates.
The Central Bank’s external reserves decreased by Lm7.7m,
or 1.1 per cent, as a result of net sales to banks and payments
for fuel imports. Meanwhile, those of the deposit money banks
rose by Lm24.6m, largely reflecting capital inflows by the corporate
sector, whereas the net foreign assets of the international
banks declined by Lm27.1m.
Further economic and monetary information is available from
the website of the Central Bank of Malta www.centralbankmalta.com
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