Broad money (M3) expanded by Lm17.4 million, or 0.5%, in December. However, the annual rate of growth of M3 slowed down to 5.2% from 6.0% in November. Monetary expansion during the month was entirely driven by higher credit to the nonblank private sector, as the net foreign assets of the banking system contracted.
Narrow money (M1) declined by Lm14.8 million, or 0.9%, in December. Deposits withdrawable on demand dropped by Lm16.0 million, or 1.3%, with foreign currency deposits accounting for most of the fall. In contrast, mainly reflecting seasonal patterns, currency in circulation put on Lm1.2 million, or 0.3%. Consequently, M1 contracted by 0.8% on a year-on-year basis, whereas it had expanded by 1.7% during the year to November.
Despite the drop in M1, intermediate money (M2) rose by Lm17.4 million, or 0.5%, in December as deposits with an agreed maturity of up to two years added Lm31.7 million, or 2.1%. Deposits denominated in Maltese lira belonging to households and insurance companies contributed significantly to the increase. Meanwhile, deposits redeemable up to three months’ notice rose marginally.
As regards the counterparts of M3, domestic credit expanded by Lm51.0 million, or 1.8%, in December, due to higher claims on other residents. Consequently, the annual growth rate in domestic credit accelerated to 9.2% in December from 8.1% in November. Claims on other residents surged by Lm58.9 million, or 2.4%, mostly on account of higher lending to the non-bank private sector, primarily to the construction industry and to households – mostly to finance house purchases. Increased credit to the wholesale and retail trades and to the transport, storage & communication sector, also contributed. In contrast, net claims on central government dropped by Lm7.9 million, or 2.1%, as government deposits with the Central Bank of
Malta.
The net foreign assets of the banking system contracted for the second consecutive month, falling by Lm20.9 million, or 1.0%, in December. Consequently, their annual growth rate declined to 13.9%, from 19.6% in November. The Central Bank of
Malta’s net holdings contracted by Lm11.7 million, reflecting net sales of foreign exchange to the rest of the banking system. This notwithstanding, the net foreign assets of the rest of the banking system shed Lm9.1 million, driven by demand for foreign exchange from the non-bank private sector.
The other counterparts of M3 expanded by Lm12.7 million, or 0.7%, in December, mainly reflecting an increase in the equity capital of a foreign-owned bank.
Source: Central Bank of Malta
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