South Korea’s money supply growth accelerated to 7.20% YoY in November 2025, up from 6.80% in October and well above the 12-month average of 6.10%. This expansion reflects increased liquidity amid ongoing accommodative monetary policy and fiscal stimulus measures. The rise contrasts with a mid-year dip to 5.40% in August, underscoring a recovery in credit demand and deposit growth.

Drivers this month

• Strong household deposit growth amid rising income levels.
• Corporate borrowing increased due to capital expenditure plans.
• Government bond issuance supporting liquidity in financial markets.

Policy pulse

The Bank of Korea’s stance remains accommodative, with the current money supply growth exceeding the inflation target range of 2%. This suggests ongoing monetary easing to support economic recovery despite inflationary pressures.

Market lens

Immediate reaction: The KRW/USD currency pair weakened by 0.30% within the first hour post-release, reflecting expectations of prolonged liquidity expansion. Short-term government bond yields rose by 5 basis points, signaling moderate inflation concerns.

Core macroeconomic indicators provide essential context for the money supply growth. South Korea’s GDP growth for Q3 2025 was reported at 2.90% YoY, slightly below the 3.10% average of the past year. Inflation remains elevated at 3.50%, above the central bank’s 2% target, driven by energy and food prices. Unemployment held steady at 3.70%, indicating a resilient labor market.

Monetary Policy & Financial Conditions

The Bank of Korea has maintained its policy rate at 1.75% since September 2025, balancing inflation control with growth support. Financial conditions remain loose, with credit growth at 6.50% YoY, supporting the money supply expansion.

Fiscal Policy & Government Budget

Fiscal stimulus continues via increased government spending, with the 2025 budget deficit projected at 3.20% of GDP. Infrastructure and green energy investments have driven public sector borrowing, contributing to liquidity in the banking system.

Structural & Long-Run Trends

Over the past five years, South Korea’s money supply growth has averaged 5.80% annually, with cyclical fluctuations tied to global trade cycles and domestic policy shifts. The current acceleration aligns with a post-pandemic rebound phase and increased government spending.

External Shocks & Geopolitical Risks

Heightened geopolitical tensions in Northeast Asia and global supply chain disruptions pose downside risks to liquidity and growth. However, South Korea’s diversified export base and strong foreign reserves provide buffers against external shocks.

Market lens

Immediate reaction: KRW depreciated modestly against the USD, while short-term bond yields increased, reflecting market anticipation of sustained monetary accommodation and inflationary pressures.

Looking ahead, South Korea’s money supply growth trajectory will hinge on monetary policy adjustments, fiscal stimulus continuation, and external demand conditions. The Bank of Korea faces a delicate balance between supporting growth and containing inflation.

Bullish scenario (30% probability)

• Continued fiscal stimulus and strong export demand push money supply growth above 7.50%.
• Inflation moderates due to easing commodity prices, allowing sustained monetary easing.
• Credit expansion fuels robust domestic consumption and investment.

Base scenario (50% probability)

• Money supply growth stabilizes around 7%, consistent with moderate economic growth.
• Monetary policy remains steady, with gradual normalization expected in 2026.
• External risks contained, supporting steady export performance.

Bearish scenario (20% probability)

• Geopolitical tensions or global slowdown reduce credit demand, slowing money supply growth below 6%.
• Inflation spikes force tighter monetary policy, curbing liquidity.
• Fiscal consolidation pressures reduce government borrowing and liquidity injection.

Policy pulse

The Bank of Korea’s next moves will be closely watched. A sustained money supply growth above 7% may prompt cautious tightening, especially if inflation remains elevated.

South Korea’s accelerating money supply growth signals robust liquidity conditions supporting economic recovery. However, the balance between growth and inflation remains fragile amid external uncertainties. Policymakers must navigate these dynamics carefully to sustain momentum without overheating the economy.

Key Markets Likely to React to Money Supply

Money supply growth influences multiple asset classes, particularly currency, bonds, and equities. The KRW/USD forex pair typically reacts to liquidity shifts, while government bond yields reflect inflation expectations. Equities in export-driven sectors also track monetary conditions closely.

• KRWUSD – Sensitive to liquidity and interest rate expectations in South Korea.
• KOSPI – South Korea’s benchmark equity index, impacted by monetary and fiscal policy.
• SAMSUNG – Major export-driven stock influenced by credit and currency trends.
• BTCUSD – Cryptocurrency often reacts to shifts in liquidity and risk appetite.
• KBANK – Financial sector stock sensitive to credit growth and interest rates.

FAQs

What does South Korea’s money supply growth indicate?

It reflects the amount of liquidity circulating in the economy, influencing inflation, growth, and financial conditions.

How does money supply affect the KRW currency?

Higher money supply growth often leads to currency depreciation due to increased liquidity and inflation expectations.

What are the risks of rapid money supply growth?

Rapid growth can fuel inflation and asset bubbles, prompting tighter monetary policy and market volatility.

Key takeaway: South Korea’s accelerating money supply growth supports economic recovery but requires vigilant policy to manage inflation and external risks.