GCC Central Banks See Strong Growth In Assets And Money Supply

Post by : Mumtaaz Qadiri

The Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf, known as GCC-Stat, recently released its latest data on the financial status of the Gulf region. The report shows that the net foreign assets of the Gulf central banks increased by 6.3 percent in 2024 compared to the previous year. By the end of 2024, these assets reached approximately US$761.9 billion. This increase indicates that Gulf countries are strengthening their reserves and maintaining a stable economic position.

Narrow Money Supply (M1) Shows Growth

The total narrow money supply, called M1, in the GCC region also rose during 2024. M1 includes currency in circulation and demand deposits, which are money available for immediate spending. By the end of 2024, the M1 money supply reached about US$801 billion, marking a 10 percent increase compared to the end of 2023. This growth reflects higher cash availability and easier access to money for businesses and individuals.

Broad Money Supply (M2) Expands

The broader money supply, called M2, also saw significant growth in 2024. M2 includes M1 plus quasi-money, such as savings deposits and time deposits, which are not immediately available for spending but contribute to overall liquidity. By the end of 2024, M2 reached around US$1.763 trillion, representing a 9.3 percent increase from its value at the end of 2023. This shows that the GCC economies are expanding their financial resources and overall liquidity.

Quarterly Money Supply Trends

When comparing 2024 with the previous year, M2 increased in every quarter of 2024. On the other hand, M1 had shown declines in the first three quarters of 2023 because of reduced cash deposits. This indicates that the financial situation has improved in 2024, with more money circulating in the economy and greater confidence in the banking system.

Demand Deposits Grow Significantly

The data also highlights that demand deposits—money held in bank accounts available for immediate withdrawal—recorded significant year-on-year monthly increases throughout 2024. People and businesses in the GCC have been keeping more money in bank accounts that can be used immediately, which helps support spending, investments, and economic growth.

Quasi-Money Growth Slows Slightly

Quasi-money, which includes savings accounts, time deposits, and other financial instruments not instantly accessible, also grew during 2024. However, the growth rate for quasi-money slowed down slightly compared to previous periods. This shows that while people continue to save and invest in such instruments, the rate of increase is becoming more moderate.

Currency In Circulation Increases

Currency outside banks, meaning money physically circulating in the economy, also rose during 2024. Although the increase was smaller compared to quasi-money, it still contributed to the rise in the overall money supply. More currency in circulation indicates higher spending and liquidity available to businesses and consumers.

Factors Behind Money Supply Increase

Several factors contributed to the growth in both M1 and M2. Increased deposits, higher cash circulation, and improved economic confidence have all played a role. As Gulf economies recover and expand, people are saving more, investing in banks, and using cash for daily transactions, all of which contribute to rising money supply figures.

Economic Implications For GCC

The growth in money supply and central bank assets has positive implications for GCC economies. A higher money supply helps fuel business activity, trade, and investment. It also supports government initiatives, infrastructure development, and economic diversification. Rising foreign assets indicate stronger financial stability and the ability of central banks to respond to economic challenges.

Comparing M1 And M2 Trends

M1 and M2 provide a complete picture of money flow in the economy. M1 represents money immediately available for spending, while M2 includes both M1 and other savings that can be converted to cash. The rise in both measures shows that the GCC economies have sufficient liquidity to support growth and manage financial stability.

Impact On Businesses And Consumers

For businesses, the increase in money supply means better access to funds for investments, operations, and expansion. For consumers, higher M1 ensures easier access to cash and bank accounts, supporting daily transactions and spending. Overall, these trends suggest a growing and active economic environment in the Gulf countries.

Central Banks’ Role

Central banks in the GCC play a critical role in managing money supply, foreign assets, and economic stability. The 6.3 percent rise in net foreign assets indicates effective monetary policy and careful management of reserves. These assets provide a financial cushion for the countries, ensuring they can respond to economic shocks and maintain stability in times of uncertainty.

Monthly Trends And Observations

Monthly data throughout 2024 shows consistent increases in demand deposits and currency circulation. Quasi-money continues to grow, though at a slower pace. Analysts suggest that these trends reflect greater confidence in banks, stronger economic activity, and careful financial planning by individuals and businesses across the GCC.

Supporting Economic Growth

The increase in both narrow and broad money supply supports overall economic growth. With more money circulating in the economy, businesses can expand, governments can invest in projects, and consumers can spend more freely. This contributes to higher employment, stronger trade, and improved living standards in the Gulf countries.

Outlook For The GCC Economies

Experts expect that these positive trends in money supply and foreign assets will continue in the near future. As global economic conditions improve and domestic growth initiatives take effect, the GCC countries are likely to see further increases in liquidity, deposits, and financial stability. Central banks will continue to monitor trends and adjust policies as needed.

The latest data from GCC-Stat highlights a strong performance by the Gulf central banks and financial systems. Net foreign assets rose to US$761.9 billion, M1 reached US$801 billion, and M2 grew to US$1.763 trillion in 2024. The increase in demand deposits, quasi-money, and currency circulation shows growing confidence in the banking system and strong economic activity across the Gulf countries. This growth strengthens both financial stability and future economic prospects.

GCC Money Supply, Central Bank Assets, M1 M2 Growth, Gulf Economic Data