Resident monetary contributions to Euro area increase by 1% to €9.2 billion

The narrow money (M1) component expanded by €50.6 million, or 1.0%, on its June level, driven by higher overnight deposits belonging to Maltese residents. These deposits expanded by 1.1%, as balances held by households, public non-financial companies and non-bank financial intermediaries rose. In contrast, overnight deposits belonging to other €o area residents declined marginally. Meanwhile, currency issued added €7.1 million, or 1.1%. Overall, however, the annual rate of growth of M1 slowed down from 19.5% in June to 18.7% in July.

The intermediate money component (M2) continued to rise during the month reviewed, increasing by 0.9%, or €79.4 million. This was driven by the rise in M1, coupled with growth in deposits with an agreed maturity of up to two years, which increased by 0.7%, or €29.4 million, after having contracted for three months in a row. This increase stemmed primarily from higher deposits belonging to Maltese residents, due to higher balances held by insurance companies and other non-bank financial intermediaries. Conversely, deposits redeemable at up to three months’ notice decreased marginally.

In sum, deposits belonging to residents of Malta rose by €65.7 million in July, as a result of increases in overnight deposits and deposits with an agreed maturity of up to two years. Consequently, the annual rate of growth of residents’ deposits accelerated to 3.8% from 3.4% in June.

Turning to the counterparts of M3, during July credit to residents of Malta decreased by €4.6 million, or 0.1%. This occurred despite an increase in MFI holdings of Treasury bills, which boosted credit to the Maltese general government by €40.3 million. On the other hand, credit to residents of Malta other than general government went down by €44.9 million, or 0.6%, as loans to non-financial firms declined.

As a result, the annual rate of growth of credit to Maltese residents slowed down to 7.2% in July from 7.9% in June. At 5.8%, the annual growth rate of credit to Maltese residents other than general government slowed down from 6.8% a month earlier.

Meanwhile, credit to residents of other €o area Member States decreased by €137.6 million, fuelled primarily by a drop in lending to non-bank financial intermediaries and non-financial firms. As a result, during the month reviewed credit to all €o area residents contracted by €142.2 million, or 1.0%.

The external counterpart of M3, which reflects transactions between MFIs resident in Malta and non-euro area residents, increased by €564.1 million, or 6.4%, in July. This reflected a considerable decline in MFIs’ liabilities to non-euro area residents. In particular, time deposits belonging to private non-financial companies and non-bank financial intermediaries decreased, as did loans taken up by resident credit institutions. Meanwhile, MFIs’ claims on non-euro area residents also fell, though to a lesser extent, reflecting a reduction in loans granted to non-financial companies residing outside the €o area.

In contrast, the ‘other’ counterparts of M3 went up by €327.7 million, or 2.4%, during the month under review. This was mostly attributable to an increase in ‘other net liabilities’, which captures interbank transactions across the €o area. In turn, the latter reflected a drop in Maltese banks’ holdings of securities other than shares issued by banks resident elsewhere in the €o area.

The weighted average interest rate applied by resident credit institutions to customer deposits remained stable at 1.37%, while that charged on loans increased by six basis points since June to 4.75%.