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South Korea's Money Supply Rises in December on Strong Deposit Growth

South Korea's money supply, as measured by M2, increased in December after a decline in November. The rise was primarily fueled by growth in foreign currency deposits from corporations and households. Demand deposits also climbed as companies managed year-end finances and households received bonus payments. Separately, the central bank supplied fresh banknotes for the Lunar New Year holiday, though the net issuance was lower than the previous year.

Key Points: South Korea Money Supply Rises on Corporate, Household Deposits

  • M2 money supply rose 0.6% in December
  • Driven by corporate and household foreign currency deposits
  • Companies managed year-end financial ratios
  • Households saw inflow of surplus funds and bonuses
2 min read

Money supply rebounds on rising corporate, household deposits: BOK

South Korea's M2 money supply increased 0.6% in December, driven by corporate and household foreign currency and demand deposits, BOK data shows.

"The increase was largely driven by foreign currency deposits held by corporations and households - BOK official"

Seoul, Feb 13

South Korea's money supply rose in December from a month earlier, driven by increases in corporate and household deposits in both foreign and local currencies, central bank data showed on Friday.

The country's M2, a key gauge of the money supply, stood at an average of 4,080.7 trillion won (US$2.83 trillion) in December, up 0.6 percent from the previous month, according to the preliminary data from the Bank of Korea (BOK), reports Yonhap news agency.

The figure had risen steadily since April before posting its first on-month decline in November. The M2 is a measure of the money supply that counts cash, demand deposits and other easily convertible financial instruments.

"The increase was largely driven by foreign currency deposits held by corporations and households, such as banks' U.S. dollar deposits. Export and import firms, in particular, increased their trade-related fund deposits," a BOK official said.

"Demand deposits also rose as companies managed their year-end financial ratios, while households saw an inflow of surplus funds, including bonuses," he added.

By entity, liquidity increased by 12.9 trillion won among companies, 10.4 trillion won among households and nonprofit organizations, and 2.3 trillion won among other financial institutions, the data showed.

Meanwhile, the central bank said it has supplied a net 4.76 trillion won (US$3.29 billion) worth of fresh banknotes for this year's Lunar New Year holiday.

The Bank of Korea (BOK) said it issued 5.03 trillion won in currency to banks and other financial institutions during the 10 business days through Friday and withdrew 273.5 billion won, bringing the net supply to 4.76 trillion won.

The net issuance marked a 6.2 percent decrease from the amount supplied during the same period ahead of last year's holiday, it added.

"The decline was attributable to the Lunar New Year holiday period shortening from six days last year to five days this year, while year-end and early-year currency demand was separated from holiday-related cash demand this year," a BOK official said.

This year's Lunar New Year falls on Tuesday, with the holiday running through Wednesday.

Demand for fresh bills typically rises during the holiday season, as it is customary in South Korea for elders to give cash gifts to younger family members after receiving traditional New Year's bows.

- IANS

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Reader Comments

S
Sarah B
The part about Lunar New Year cash gifts is fascinating! It's similar to how we give 'shagun' or gifts during Diwali. The central bank having to manage fresh banknote supply for such cultural practices is a unique challenge.
P
Priya S
A 0.6% rise in M2 seems modest but steady. The breakdown is useful - companies and households both adding liquidity. In our context, I wonder if festive season bonuses and corporate savings are having a similar effect. Good, data-driven report.
V
Vikram M
While the data is positive, the article doesn't delve much into *why* corporations are increasing foreign currency deposits. Is it hedging against uncertainty? Awaiting better forex rates? A bit more analysis would have been helpful.
R
Rohit P
Net supply of fresh notes down by 6.2% because the holiday is shorter. Shows how precisely central banks plan for cultural events! 🧧 Makes me think of the massive currency logistics before Diwali here. Complex operations behind the scenes.
M
Michael C
Solid economic indicator. Increase in household deposits, especially from bonuses, suggests people are saving rather than spending immediately. Could be a cautious approach globally with current economic headwinds. South Korea's data often reflects broader trends.

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