Market Money Supply Nears 3,200 Trillion Won... Immediately Convertible Funds Increased by 20% Last Year

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] As liquidity continues to expand amid the COVID-19 pandemic, the money supply in the market has approached 3,200 trillion won. Funds that can be immediately converted into cash stand at around 1,100 trillion won, having increased by more than 20% over the past year. This marks the largest surge in 18 years since the 2002 credit card crisis.

According to the 'Monetary and Liquidity in December 2020' released by the Bank of Korea on the 17th, the broad money supply (M2) in December last year was 3,191.3 trillion won (average balance, account adjustment basis), up 12.9 trillion won (0.4%) from the previous month.

M2 is a broad monetary indicator that includes narrow money (M1), which consists of cash, demand deposits, and savings deposits that can be withdrawn at any time, as well as financial products such as money market funds (MMF), time deposits under two years, and beneficiary certificates.

Compared to the same month of the previous year (average balance, original series), the money supply increased by 285.3 trillion won (9.8%). It has been soaring with a growth rate in the 9% range for nine consecutive months since April last year.

M1, which represents funds that can be converted into cash at any time, stood at 1,159 trillion won as of December last year, up 1.0% from the previous month. On an annual basis, M1 surged by 20.8% (182.1 trillion won). This is the largest increase since the 22.5% growth rate recorded during the 2002 credit card crisis.

Meanwhile, looking at December's M2 by economic agents, the money supply for households and non-profit organizations increased by 8.9 trillion won from the previous month, reaching 1,614.6 trillion won. The increase in the household sector's money supply was mainly centered on savings deposits that can be withdrawn at any time, which serve as short-term standby funds. Corporate money supply rose by 5.4 trillion won, and other sectors increased by 2 trillion won. Other financial institutions saw a decrease of 4.5 trillion won. By product, time deposits under two years increased by 8.6 trillion won, and savings deposits that can be withdrawn at any time rose by 7.9 trillion won.