The monetary aggregate M1 (money supply), which includes cash outside banks, deposits from other banking institutions and other domestic sectors at the HNB, as well as deposit money at banks, recorded a decline on a monthly basis in January after three months.
Compared to the end of December 2006, the money supply decreased by 4.8%, falling to 46 billion kuna. On an annual basis, a relatively strong growth of 23.5% or 8.75 billion kuna was recorded. This growth is a result of the base effect, i.e., the strong growth of the monetary aggregate M1 during the previous year.
A somewhat more pronounced growth in December, besides the usual seasonal effect (increased demand for cash during the pre-holiday period), is also a result of a relatively high inflow of funds into the giro and current accounts of companies, as well as the strong growth of bank placements and banks’ efforts to increase the base for calculating placements this year.
During January, the largest contribution to the decline of M1 came from the decrease in deposit money (1.8 billion kuna), while cash outside banks, with a monthly decline of 722 million kuna, fell again below 14 billion kuna (13.9 billion kuna). The broadly defined monetary aggregate M4 (total liquid assets that include M1, kuna savings and time deposits, foreign currency deposits, as well as bonds and money market instruments) recorded a continuation of growth, reaching the highest level to date of 183 billion kuna, despite such movements in M1.
