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Currency in circulation,
deposits up by Lm27.3m
Both the main counterparts of monetary expansion, domestic
credit and the net foreign assets of the banking system, contributed
significantly to the resumption of monetary growth in July after
the previous month’s interruption.
Broad money, M3, which is the sum of currency in circulation
and residents’ deposits with the banking system, rose by
Lm27.3m, or one per cent, and its annual growth rate accelerated
to 7.6 per cent. Deposits denominated in Maltese liri accoun-ted
for almost the entire increase in M3, as residents’ foreign
currency deposits decreased and currency in circulation rose
moderately.
Narrow money, M1, which consists of currency in circulation
and demand deposits, accounted for most of the expansion in
broad money during the month. M1 added Lm21m, or 3.3 per cent,
with the annual growth rate accelerating to 9.2 per cent from
7.8 per cent in June. In turn, demand deposits, which expanded
by Lm19m, accounted for most of the increase in narrow money
during the month. An increase in corporate demand deposits and
a sharp fall in the value of cheques in the course of collection,
which is netted from demand deposits, boosted current account
balances. Meanwhile, currency in circulation rose by Lm1.9m.
Savings deposits dropped by Lm3.4m in July, with personal deposits
contracting, possibly because households withdrew funds to subscribe
to the latest issue of Malta Government stocks. In contrast,
time deposits recovered partially from the sharp fall registered
in June, rising by Lm9.7m, boosted by personal deposits. Consequently,
quasi-money, which is the sum of savings and time deposits,
expanded by Lm6.3m, with the annual growth rate accelerating
slightly, to seven per cent.
Following three months of moderate growth, domestic credit expanded
by Lm20m in July. As for the sources of credit growth, the
pattern observed in recent months was repeated with relatively
rapid growth in net claims on government offsetting lower claims
on the private sector and public corporations. As a result,
the annual growth rate accelerated slightly to 9.8 per cent.
Net claims on government expanded by Lm26.3m, largely because
deposit money banks added to their Treasury bill holdings. In
contrast, claims on the private and private sectors fell for
the third consecutive month, by Lm6.3m. The decline was spread
across public and private sector borrowers, but was especially
significant in the case of credit to public corporations in
the energy and water sector and to
manufacturing industry in general. In contrast, personal credit
expan-ded further, driven entirely by housing finance.
The net foreign assets of the banking system increased by Lm6.8m
during the month. Consequently, the annual growth rate swung
from -0.2 per cent to 1.9 per cent. The net foreign assets of
the Central Bank recovered sharply, rising by Lm29.3m, or 4.5
per cent, as a result of heavy purchases of foreign exchange
from domestic banks. These transactions largely reflected portfolio
adjustments by the banks, which tended to switch some of their
foreign currency assets into Maltese lira investments in response
to interest rate differentials that favoured local currency
assets. In fact, the net foreign assets of the rest of the banking
system dropped by Lm22.5m, or 6.6 per cent.
Further economic and monetary information can be obtained from
the website of the Central Bank of Malta www.centralbankmalta.com.
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