South Korea's Money Supply Continues to Grow

The Bank of Korea's recent report highlights a significant milestone in South Korea's economic landscape. For the 19th consecutive month, the country's money supply has seen an upward trajectory, with December 2024 marking a 1% increase from the previous month. This growth has propelled the broad money supply (M2) to an impressive 4,183.5 trillion won, showcasing a 6.9% rise compared to the same period last year.

Driving Forces Behind the Surge

The expansion is largely fueled by the volatility in the domestic asset market, leading to an accumulation of idle investment funds. Notably, savings deposits have surged by 18.6 trillion won, while other financial instruments have also seen significant growth. However, this growth is not uniform, with time deposits and certain financial bonds experiencing outflows.

Economic Entities and the Narrow Money Supply

The increase in money supply spans across various sectors, with households, companies, and financial institutions all witnessing growth. The narrow money supply M1, encompassing cash and demand deposits, also saw a 2% increase, reaching 1,274.3 trillion won.

Expert Opinions and Future Outlook

Despite the positive indicators, experts like Lee Seung-heon from Soongsil University emphasize the need for fiscal policy intervention. The economic downturn, compounded by internal and external uncertainties, suggests that the benefits of exports are not sufficiently translating into domestic demand. This scenario underscores the importance of selective fiscal measures to stimulate the economy effectively.