The growth of South Korea‘s money supply rose to an eight-month high in October as bank lending remained brisk and the current account surplus widened, the central bank said Wednesday.
South Korea’s M2, a narrow measure of the money supply, amounted to 1,742.6 trillion won ($1.5 trillion) in October, up 4.4 percent from a year earlier, according to the Bank of Korea.
In October, M2 growth quickened from a 4.2 percent on-year expansion tallied in September and marked its sharpest growth since 5 percent gain in February.
The M2 covers currency in circulation and all types of deposits with a maturity of less than two years at lenders and non-banking financial institutions, excluding those held by insurers and brokerage houses.
The growth of South Korea‘s money supply picked up for the fourth consecutive month in October after M2 growth hit a seven-year low of 3 percent in June, it added.
The M2 largely grew at a double-digit pace for about 3 years since 2006 when liquidity spiked concurrently with property market bubbles.
The impact of the 2008 global financial crisis, however, made the on-year growth of the M2 slow sharply as banks were wary of extending loans. The annual growth of the M2 eased for the 12th consecutive month in June.
The BOK said in a separate statement that South Korea’s M2 is estimated to have grown at the mid-4 percent range in November as bank lending expanded, overshadowing foreign capital outflows.
Liquidity provided by financial institutions also grew 6.1 percent year-on-year to 2,263.6 trillion won in October. The growth accelerated from a 5.7 percent expansion in September and marked the fastest growth in nine months, the BOK added.
South Korea‘s liquidity aggregate, the broadest measure of the money supply, expanded 8.9 percent in October from a year earlier, the same pace as seen in the previous month, it added.
The liquidity aggregate covers currency in circulation and all types of deposits at financial institutions and state and corporate bonds.
The data came one day before BOK policymakers plan to hold their monthly rate-setting meeting. The BOK is widely expected to freeze the key interest rate at 3.25 percent for the sixth straight month due to risks from Europe’s debt crisis. (Yonhap News)
