S. Korea's money supply growth hits 7-year low in May

SEOUL, July 13 (Yonhap) -- South Korea's money supply grew at the slowest clip in more than seven years in May as the government's tax receipt rose and foreign stock funds flowed out of the country, the central bank said Wednesday.
The country's M2, a narrow measure of its money supply, reached 1,690.5 trillion won (US$1,587 trillion) in May, up 3.7 percent from a year earlier, according to the Bank of Korea (BOK).
The May number slowed from a 3.9 percent on-year gain tallied in April and marked the slowest growth since a 3.1 percent expansion in April 2004.
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 at insurers and brokerage houses.
"In May, liquidity provided by the government declined mainly due to a rise in tax revenues and foreigners pulling out their stock funds," said Kim Byoung-soo, an economist at the BOK.
South Korea's current account surplus widened to $2.26 billion in May on sustained exports, but the account of portfolio investment posted a net outflow of $1.14 billion.
The on-year growth in the M2 has been slowing since July of last year when the money supply expanded 9.3 percent from the previous year, as banks have been wary of extending loans despite ample liquidity driven by low interest rates.
The BOK said in a separate statement that the country's M2 is estimated to have grown around 3 percent in June as liquidity provided by the government sharply fell.
The data came a day before the BOK holds its monthly rate-setting session. Analysts said the central bank is likely to freeze the key rate at 3.25 percent following June's hike.
Meanwhile, liquidity provided by financial institutions grew 4.4 percent on-year to 2,175.6 trillion won in May, slowing from 4.5 percent on-year growth in April. The May growth rate marked the slowest expansion since the central bank began compiling related data in 1986.
The country's liquidity aggregate, the broadest measure of the money supply, grew 7.2 percent in May after growing 7.6 percent the previous month.
The liquidity aggregate covers currency in circulation, all types of deposits at financial institutions, and state and corporate bonds.
sooyeon@yna.co.kr
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