Central Bank of Malta issues monetary statistical release

The Central Bank of Malta has just issued its commentary on the release of monetary statistics for October 2012. This release also includes a brief update on its GDP projections.

The contribution of resident Monetary Financial Institutions (MFIs) to the euro area broad money stock (M3) expanded by EUR27.8 million, or 0.3%, in October, to EUR10.3 billion (see Table 1). Nonetheless, since this increase was smaller than that registered in October 2011, the annual growth rate moderated to 4.9% in October, from 6.3% in September.

The month-on-month rise in M3 stemmed from an increase in intermediate money (M2), which went up by EUR39.8 million, or 0.4%, offsetting a EUR12.0 million decline in marketable instruments. The latter reflected a drop in shares issued by money market funds resident in Malta, which are volatile.

In turn, growth in M2 was driven entirely by a rise in deposits with an agreed maturi- ty of up to two years. These short-term time deposits expanded by EUR98.0 million, or 2.5%, driven by a broadbased increase across deposit holders and particularly in balances belonging to private nonfinancial corporations (NFCs).

Turning to the counterparts of M3, credit to euro area residents dropped by EUR273.3 million, or 1.7%, as credit provided to general government and to the remaining sectors of the economy fell. Consequently, the annual growth rate declined to -2.1%, from -0.9% in September.

Credit to general government fell by EUR200.8 million, or 5.3%, reflecting lower bank holdings of euro-area government securities. Meanwhile, credit to other sectors went down by EUR72.4 million, or 0.6%, driven by a reduction in loans granted to private NFCs.

The "other counterparts" category, which is negatively related to M3, expanded by EUR354.0 million, or 2.4%. Growth was driven by an increase in other liabilities (net), which capture interbank transactions between euro area credit institutions. An increase in longer-term financial liabilities in the form of deposits excluded from broad money, and capital & reserves also contributed, though to a much lesser extent. Conversely, there was a partly offsetting drop in central government deposits with the banking sector, driven by a decline in deposits belonging to the Maltese government.

In October, deposits belonging to residents of Malta and held with resident MFIs expanded by EUR26.6 million, or 0.3%, on the previous month (see Table 2). Nonetheless, the annual growth rate slowed down to 5.2%, from 5.7% in September.

The rise in deposits stemmed entirely from an increase in balances with an agreed maturity of up to two years. These deposits expanded by EUR69.3 million, or 1.9%, driven mainly by balances belonging to non-bank financial intermediaries and NFCs. On the other hand, deposits belonging to households fell, reflecting a switch to longerterm deposits outside M3 during the month.