Money in Circulation Surpasses 3,000 Trillion Won... Record High Increase in Corporate Fundraising

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Due to the economic downturn caused by the novel coronavirus disease (COVID-19) crisis, companies have massively secured funds through loans, causing the money supply in the market to expand at the largest scale ever recorded within a month.

According to the "Money and Liquidity in April" report released by the Bank of Korea on the 10th, the broad money supply (M2) in April reached 3,018.6 trillion won, an increase of 34 trillion won (1.1%) compared to March. This is the first time M2 has exceeded 3,000 trillion won.

The broad money supply indicator M2 includes cash, demand deposits, and checking deposits (collectively M1), as well as short-term financial products that can be immediately converted into cash, such as MMFs (Money Market Funds), time deposits and savings deposits under two years, beneficiary certificates, CDs (Certificates of Deposit), RPs (Repurchase Agreements), financial bonds under two years, and money trusts under two years.

The increase in M2 in April (34 trillion won) is the largest monthly increase since the M2-related statistics were established in December 2001. Even when recalculated retrospectively based on the current M2 standard, there has never been a monthly increase exceeding 34 trillion won before 2001, making this effectively the largest monthly increase ever recorded.

By sector, the money supply increased by 22.2 trillion won in corporations, 10.3 trillion won in other financial institutions, and 7.3 trillion won in households and non-profit organizations. Among products, demand savings deposits (15.1 trillion won) and other financial products such as foreign currency deposits under two years (8.5 trillion won) showed notable growth.

A Bank of Korea official explained the sharp increase in the money supply as "due to increased credit supply (loans) by companies seeking to secure funds after the COVID-19 crisis." The year-on-year growth rate of the money supply (M2) was recorded at 9.1%, higher than March's 8.4%, and the highest level in 4 years and 7 months since September 2015.

This content was produced with the assistance of AI translation services.