Central Bank releases monetary statistics for March

Malta's contribution to the euro area broad money stock (M3) contracted by €114.7 million, or 1.3 per cent, in March, compared to the preceding month, reaching €8,585.8 million.

As a result, the annual rate of growth of M3 was a negative 1.1 per cent in March compared with a no growth situation in February. A major factor contributing to the decline in deposits over the month was the issue of government securities on the capital market, which were substantially oversubscribed.

Narrow money (M1) fell by €2.4 million, or 0.1 per cent, during the month, driven by a decrease of €4.9 million in overnight deposits, which outweighed an increase in currency issued. Nevertheless, the annual rate of growth of M1 edged up from 3.3 per cent in February to 3.5 per cent in March.

Intermediate money (M2) declined further, falling by €114.9 million, or 1.3 per cent, in February. This was mostly on account of a drop in deposits with an agreed maturity of up to two years, which decreased by €112.5 million, or 2.3 per cent. In turn, this stemmed from a contraction in balances belonging to local residents, mainly households and private non-financial companies.

As a result, the year-on-year growth rate of local residents' deposits with an agreed maturity of up to two years fell further, reaching -3 per cent from -0.4 per cent one month earlier. Conversely, deposits redeemable at up to three months' notice remained relatively unchanged.

On aggregate, deposits belonging to local residents contracted by €132.9 million, with the consequence that the annual growth rate decelerated to -0.2 per cent, from 1.8 per cent in February.

On the counterparts side, credit widened by €16.3 million, or 0.1 per cent, in March as higher credit to other sectors offset a drop in credit to general government.

Credit to residents of Malta expanded by €58.6 million.

Lending to the Maltese general government sector by resident MFIs decreased by €38.5 million, since a decline in MFI holdings of Malta Government Stocks outweighed an increase in their Treasury Bill portfolios.

As a result, the year-on-year rate of growth of credit granted to general government slowed down slightly to 11.2 per cent from 11.5 per cent in February. In contrast, credit to other Maltese residents expanded by €97.1 million, or 1.3 per cent, in March, mainly owing to higher loans taken up by non-financial companies and households. In turn, this was due to increased lending to the wholesale and retail trade sector, to households - predominantly to finance house purchases - and to the construction sector. Nevertheless, the annual growth rate of credit to local residents slowed down to 12.4 per cent, a reduction of 0.4 percentage points compared to the previous month.

The external counterpart of M3 increased by €1,092.5 million, or 20.3 per cent, as a drop in resident MFIs' claims on non-euro area residents only partly offset the substantial fall in their liabilities to them. Specifically, on the assets side, resident MFIs reduced their deposits with credit institutions resident in the euro area and also cut down on the amount of loans granted to them. On the liabilities side, time deposits belonging to banks resident outside the euro area decreased considerably.

As regards other counterpart balances, these mainly reflect interbank transactions across the euro area. In March these balances expanded by €1,223.5 million, or 13.4 per cent. This mainly reflected a drop in resident credit institutions' demand deposits held with other euro area banks.

Meanwhile, weighted average interest rates applied by resident credit institutions to customer deposits and loans continued to diverge slightly. Thus, the weighted average deposit rate declined by nine basis points to 2.12 per cent, while the corresponding lending rate increased marginally by one basis point to 4.49 per cent.

Further economic and monetary information can be obtained from the website of the Central Bank of Malta.