South Korea’s M2 money supply grew at the slowest pace in nearly three years in February on sluggish corporate and household spending despite ample liquidity on low interest rates.
According to data released by the Bank of Korea(BOK) on Tuesday, Korea’s M2 money supply - cash and deposits plus near money such as money market mutual funds and savings - amounted to 2,420.7 trillion won ($2.1 trillion) in February, up 5.9 percent from a year earlier. It was the lowest gain since April 2014 when the figure had grown 5.5 percent. The M2 money supply growing at 8 to 9 percent range in 2015 boosted by a series of interest rate cuts by the central bank had started to fall to 6 to 7 percent range since March 2016 and dipped below 6 percent in 34 months in February.
M2 money supply is one of the key economic indicators, which represents the total amount of money a country has in circulation. It includes savings deposits, beneficiary certificates, certificate of deposit (CD), repurchase agreements (RP), bills and cash management accounts (CMA), in addition to M1 money supply taking into account cash and demand deposits.
The slow gain is attributable to sharp fall in money demand from the corporate sector. M2 money supply from businesses declined by 5.7 trillion won or 0.9 percent on year to 626.3 trillion won in February, hit by the nation’s struggling key industries and corporate restructuring movement and lethargic investment amid foggy economic prospects, market experts suggest.
Some experts point out that the record-low rates no longer help to stimulate the economy as they only pushed up mortgage loans instead of spurring corporate investment.
By Boo Jang-won
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]