(b)
Statistics (M2)
25.
Using the broader definition of the money supply (M2) which includes currency in circulation and all bank deposits in the hands of the public (including the Government), there has recently been an acceleration in the growth of the money supply: at the end of 1976 the money supply was 21% higher than a year earlier and this rate of increase was maintained in 1977. The
average annual growth rate of GDP in current price terms over these two years was almost exactly in line with the growth rate of the money supply. Bank lending was an increasingly important determinant of this growth in the money supply: in 1977 it represented 73% of the increase compared with only 53% in 1976 (when the net acquisition of foreign currency assets, in other words, was relatively more important). By contrast, in the year ending 30th September this year, the money supply increased by
30%, having accelerated month by month since the end of May and bank lending accounted for 78% of this growth (13). A growth rate of 30% is probably not far short of twice the
present growth rate of the GDP in money terms.
(13)
Nevertheless, the ratio of domestic loans to deposits has only increased as follows:
31st December 1976
67.0%
31st December 1977
69.6%
31st May 1978
70.8%
30th September 1978
72.0%
and the average liquidity ratio of the banking system has changed very little:
31st December 1976
45.3%
31st December 1977
45.3%
31st May 1978
45.0%
30th September 1978
46.5%
/26.
ΤΟ
14