The Bank of Korea reported on the 15th that South Korea's broad money supply (M2) increased 0.8% month-over-month and 5.8% year-over-year in May 2026, driven by expanded corporate short-term funds and financial institution market operations. The monthly growth rate represents the highest since January 2026, while the annual rate marks the strongest expansion since February 2023. The 2005-2025 average for M2 year-over-year growth stood at 7.5%, providing historical context for the current expansion.
M2 Reaches 4,184.4 Trillion Won with Record Monthly Growth
According to the Bank of Korea's 'Money and Liquidity for May 2026' report released on the 15th, M2 (average balance) totaled 4,184.4 trillion won, an increase of 32.2 trillion won from the previous month. The 0.8% monthly increase marked the highest growth rate since January 2026, while the 5.8% year-over-year expansion represented the strongest annual growth since February 2023.
Demand Deposits Drive 24.3 Trillion Won Increase
By financial product category, demand savings deposits surged by 24.3 trillion won, accounting for the largest portion of M2 growth. This expansion resulted from increased corporate short-term surplus funds and expanded fund operations related to securities and derivatives markets by some other financial institutions. Money trusts with maturities under two years grew by 3.8 trillion won, driven by deposit inflows from semiconductor companies.
Non-Financial Corporations Add 30.1 Trillion Won
By economic sector, non-financial corporations contributed 30.1 trillion won to M2 growth, while other financial institutions added 11.8 trillion won and other sectors contributed 3 trillion won. In contrast, households and non-profit organizations decreased by 19 trillion won during the same period.
M1 and Broader Liquidity Measures Show Strong Growth
Narrow money (M1, average balance) increased 1.9% month-over-month and 10.0% year-over-year to reach 1,398.2 trillion won. Financial institution liquidity (Lf, average balance) expanded 1.4% from the previous month and 8.0% year-over-year to 6,309 trillion won. Broad liquidity (L, end-of-month balance) grew 1.1% from the previous month-end and 9.2% from the previous year-end to 8,053.8 trillion won. M2 including beneficiary certificates increased 2.2% month-over-month and 11.7% year-over-year, with beneficiary certificates surging 61.7% compared to the same month last year.
FAQ
What drove South Korea's M2 money supply growth in May 2026?
The Bank of Korea reported that M2 growth in May 2026 was primarily driven by a 24.3 trillion won increase in demand savings deposits, resulting from expanded corporate short-term surplus funds and increased fund operations related to securities and derivatives markets by other financial institutions. Money trusts under two years also contributed 3.8 trillion won from semiconductor company deposits.
How did different economic sectors contribute to M2 changes in May 2026?
Non-financial corporations led M2 growth with a 30.1 trillion won increase, followed by other financial institutions at 11.8 trillion won and other sectors at 3 trillion won. Households and non-profit organizations decreased their holdings by 19 trillion won during the same period.
