The Maltese contribution to the euro area broad money stock (M3) contracted by €8 million, or 0.1 per cent, in February, compared to the preceding month, reaching €8,700.5 million. Consequently, the annual rate of growth of M3 fell to zero in February, down from 0.7 per cent in January.
Narrow money (M1) expanded by €73 million, or 1.9 per cent, during the month, driven by an increase in overnight deposits. The latter rose by €73.5 million, or 2.3 per cent. In particular, deposits belonging to local residents, primarily households, increased by €65.9 million, or 2.1 per cent. On an annual basis, growth in overnight deposits belonging to local residents continued to accelerate, rising to 5.1 per cent from 2.2 per cent in January.
Intermediate money (M2), in contrast, declined by €8.9 million, or 0.1 per cent, in February, mostly on account of a drop in deposits with an agreed maturity of up to two years, which fell by €80.4 million, or 1.6 per cent. This stemmed entirely from a contraction in balances belonging to local residents, including households, private non-financial companies and, to a lesser extent, insurance companies. Thus, the annual growth rate of local residents’ deposits with an agreed maturity of up to two years fell to -0.4 per cent in February, as opposed to an increase of 2.9 per cent in January. Meanwhile, deposits redeemable at up to three months’ notice fell marginally.
Overall, deposits belonging to local residents contracted by €16.2 million in February. As a result, their annual growth rate decelerated from 2.6 per cent in January to 1.8 per cent.
On the counterpart’s side, credit expanded by €103.0 million, or 0.8 per cent, in February as both credit to general government and credit to other sectors grew. Credit to residents of Malta accounted for €43.9 million of the overall rise.
Lending to general government by resident MFIs increased by €63.7 million as their holdings of Treasury Bills and Malta Government Stocks rose. As a result, the year-on-year rate of growth of credit granted to general government accelerated to 11.5 per cent in February from 8.5 per cent in January. In contrast, credit to other sectors in the local residents’ category contracted by €19.8 million, or 0.3 per cent in February. This was due mainly to a decline in loans taken up by non-financial companies. Thus, the wholesale and retail trade sector, the electricity, gas and water supply sector and the transport, storage and communications sector all registered a drop in their credit outstanding. This decline was only partly offset by higher lending to households, primarily to finance house purchases. Consequently, the annual growth rate of credit to local residents fell from 13.6 per cent in January to 12.8 per cent in February.
The external counterpart of M3, or net claims on non-residents of the euro area, declined by €712.5 million, or 11.7 per cent, in February, as a sizeable drop in the local banking system’s claims on non-euro area residents was only partly offset by a fall in the system’s liabilities to them. Thus while resident MFIs reduced their holdings of securities (other than shares) issued by governments in non-euro area countries they also registered a fall in their external liabilities through lower external borrowings and a drop in their time deposit liabilities belonging to private non-financial companies residing outside the euro area.
As regards other counterpart balances, these mainly reflect interbank transactions across the euro area. In February other counterpart balances contracted by €601.5 million, or 6.2 per cent, as resident MFIs reduced their borrowings from other euro area banks considerably.
Meanwhile weighted average interest rates applied by resident credit institutions to customer deposits and loans moved in opposite directions during the month. Thus, the weighted average interest rate on deposits declined by 13 basis points to 2.21 per cent while the corresponding lending rate increased by 6 basis points to 4.48 per cent.
Further economic and monetary information can be obtained from the website of the Central Bank of Malta www.centralbankmalta.org