Monthly Oil & Money

Source: KIPCO Asset Management Co. - KAMCO

Money Supply

Subsequent to the upward trend seen since the beginning of the year, Kuwait’s broad measure of money supply (M2) witnessed a reversal in the trend to record a decline for the second consecutive month this year, dropping by a significant KWD 547.7 million compared to last month to stand at KWD 24.60 billion at the end of July-09, a level last seen during February-09. The decline in M2 was mainly on the back of the decrease in quasi money of KWD 160.2 million along with a significant decline of KWD 387.5 million in M1 affected by KWD sight deposits dropping by a significant 8.3% compared to June-09. The major factors that contributed to the decline in M2 were claims on government sector and government net domestic assets substantially dropping by KWD 401.1 million and KWD 549.4 million respectively, yet partially offset by an increase in other net domestic assets of KWD 515.7 million. On the other hand, net foreign assets with local banks dropped by KWD 376.5 million while, NFA with central bank grew by KWD 106.5 million compared to a significant drop of KWD 473.8 million in the previous month.

Since December 2008, M2 rose by 12.09% or KWD 2.65 billion triggered by the growth in quasi money, which includes foreign currency deposits, savings and time deposits, of 13.70% or around KWD 2.41 million. On a yearly basis, and as compared to July-08, M2 showed a lower growth compared to the previous period, where as of July-09 M2 recorded a yearly growth of 18.62%, or around KWD 3.86 billion relative to 21.52% in June-09.

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