Central Bank monetary statistics for April

After two months of strong growth, broad money, M3, expanded less rapidly in April as the net foreign assets of the banking system grew at a slower pace and domestic credit increased modestly.

M3, which consists of currency in circulation and residents' deposits with the banking system, expanded by Lm10 million, or 0.4%, during the month. Whereas households continued to add to their holdings of monetary assets, the build-up in corporate deposits recorded since the beginning of the year was partly reversed. Consequently, the annual rate of growth of broad money dropped from 10% in March to 7.9% in April.

Narrow money, M1, contracted by Lm2.2 million, or 0.3%, as lower holdings of demand deposits by households and private firms outweighed an increase in currency in circulation.

Thus, whereas demand deposits contracted by Lm8.3 million, currency in circulation expanded by Lm6 million. Consequently, the annual growth rate of narrow money dropped to 4% from 5.3% in March.

Quasi-money grew less rapidly in April, rising by Lm12.2 million, with its annual rate of growth, which had accelerated in March, dropping to 9.1% as a result.

Savings and time deposits expanded by Lm1.7 million and Lm10.5 million, respectively, as increases in personal deposits were partly offset by lower corporate deposit balances. In particular, the increase in corporate holdings of foreign currency time deposits observed in March was reversed.

The net foreign assets of the banking system continued to drive monetary growth in April, expanding by Lm23.3 million, or 2%, as an increase in the holdings of the rest of the banking system outweighed a drop in the Central Bank's net foreign assets. On an annual basis the net foreign assets' growth rate stood at 28%.

The net foreign assets of the Central Bank decreased for the second consecutive month, shedding Lm11.5 million. The drop was driven entirely by foreign exchange swaps, in which the bank sold foreign exchange and simultaneously contracted to buy it back later.

Conversely, the net foreign assets of the rest of the banking system continued to rise, going up by Lm34.8 million, or 9.6%, during the month.

Despite a drop in residents' foreign currency deposits, the deposit money banks' net holdings rose by Lm28.3 million as one institution cut its foreign liabilities significantly. At the same time, the net foreign assets of the international banks added Lm6.5 million.

Domestic credit continued to expand slowly, rising by Lm3.2 million, or 0.1%, despite interest charges that boosted claims on the private and parastatal sectors. As a result, the annual rate of credit growth decelerated further, slipping to 4.2% from 4.5% a month earlier.

Net claims on Government expanded for the fourth consecutive month as a sharp drop in Government deposits with the Central Bank outweighed a reduction in the banking system's holdings of Government securities. Although net claims on Government added Lm6 million as a result, the annual growth rate dropped marginally, to 14.7%.

Claims on the private and parastatal sectors shed Lm2.7 million, or 0.1%, during the month, although one bank added interest charges on loans and advances to aggregate credit.

As a result, the annual rate of growth of these claims fell further, dropping to 1.7%. The decline was entirely due to the parastatal sector as the banking system's claims on the latter contracted by Lm7.1 million, mainly because of loan repayments by the transport, storage and communication sub-sector.

At the same time, claims on the private sector added Lm4.4 million as increased loans and advances to the "other services" and personal sectors outweighed decreases in credit to the construction and tourism industries.

Other items (net) consist of the non-monetary liabilities of the banking system, including capital and reserves, less its other assets, such as fixed assets and interest receivable. These items continued to rise in April, adding Lm16.6 million.

The interest charges referred to earlier, which resulted in a drop in interest receivable and, hence, a reduction in the banking system's other assets, were the most important single factor behind this increase.

Further economic and monetary information can be obtained from the Central Bank Website www.centralbankmalta.com.