Is South Korea's Money Supply Growing at Its Fastest Rate in 17 Months?
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Synopsis
South Korea's money supply is on the rise, hitting a peak not seen in 17 months. Discover the factors driving this growth and its implications for the economy. The surge in M2 reflects a strong stock market and increased liquidity, setting the stage for future financial developments.
Key Takeaways
- August marked the fastest growth in South Korea's money supply in 17 months.
- M2 reached 4,400.2 trillion won (approx. $3.08 trillion).
- The rise in M2 was 1.3 percent from July.
- Year-on-year growth stood at 8.1 percent.
- The increase reflects rising demand deposits and investment funds.
Seoul, Oct 15 (NationPress) The money supply in South Korea surged at its most rapid pace in 17 months during August, fueled by increased financial resources amidst a robust stock market, as reported by the central bank on Wednesday.
According to preliminary figures from the Bank of Korea (BOK), the country's M2, a crucial indicator of money supply, reached 4,400.2 trillion won (approximately $3.08 trillion) in August, marking a 1.3 percent rise from the previous month.
This surge represents the highest monthly growth since March 2024, when M2 recorded a 1.5 percent increase.
Year-on-year, the M2 figure escalated by 8.1 percent in August, showcasing the sharpest annual growth since July 2022.
Since April, the reading has consistently risen, indicating an ongoing liquidity expansion within the financial system.
The M2 measure encompasses cash, demand deposits, and various easily convertible financial instruments.
The rise was attributed to a 14.3 trillion won increase in demand deposits month-over-month, while investment trusts expanded by 12.8 trillion won. Additionally, time deposits and installment savings with less than two years to maturity also saw a rise of 8.3 trillion won in August.
"Bond-type funds have shown consistent growth, and the rise in demand deposits is associated with temporary deposits from incoming funds awaiting investment due to a strong local stock market and increased fiscal spending by local governments," explained a BOK official.
In July, the money supply in South Korea also saw an uptick, driven by a boost in funds and deposits. The M2 stood at 4,344.3 trillion won (about $3.13 trillion) in July, reflecting a 0.8 percent increase from the previous month, as reported earlier by the BOK.
This upward trend in M2 has been ongoing since April. The M2 measure includes cash, demand deposits, and other easily convertible financial instruments, as stated by the Yonhap news agency.
Point of View
I believe the substantial rise in South Korea's money supply underscores a dynamic financial landscape. This growth, driven by strong market performance and increased liquidity, presents both opportunities and challenges for investors and policymakers. It is vital to monitor these trends as they evolve, ensuring we stay informed about their potential impact on the economy.
NationPress
15/10/2025
Frequently Asked Questions
What is M2?
M2 is a measure of the money supply that includes cash, demand deposits, and other easily convertible financial instruments.
Why did South Korea's money supply increase in August?
The increase in August was primarily driven by rising demand deposits and investment funds amid a strong stock market.
How does a rising money supply affect the economy?
An increasing money supply can lead to greater liquidity in the economy, impacting spending, investment, and overall economic growth.
Is this the highest increase in the last year?
Yes, the 8.1 percent increase year-on-year in August is the sharpest since July 2022.
What role does the Bank of Korea play?
The Bank of Korea monitors and reports on money supply metrics, helping to guide monetary policy and economic forecasting.
