GCC Central Banks' Net Foreign Assets & Money Supply Surge in 2024

In 2024, the Gulf Cooperation Council (GCC) countries experienced significant economic growth, as indicated by the latest data from the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat). The central banks in these nations saw a notable rise in their net foreign assets and money supply, reflecting a strengthening financial position and economic resilience.

Net Foreign Assets: A 6.3% Increase

The net foreign assets of the Gulf central banks grew by 6.3% in 2024, reaching approximately US$761.9 billion. This increase signifies a robust accumulation of foreign reserves, enhancing the region's financial stability and its ability to manage external shocks. Such growth in foreign assets is crucial for maintaining currency stability and supporting economic development initiatives.

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Money Supply Growth: M1 and M2

Narrow Money (M1): 10% Growth

By the end of 2024, the total narrow money supply (M1) in the GCC amounted to about US$801 billion, marking a 10% increase compared to the end of 2023. M1 includes the most liquid forms of money, such as currency in circulation and demand deposits, which are readily available for spending. The rise in M1 indicates increased economic activity and consumer confidence, as more money circulates within the economy.

Broad Money (M2): 9.3% Growth

The broad money supply (M2) reached approximately US$1.763 trillion by the end of 2024, representing a 9.3% increase compared to its value at the end of 2023. M2 encompasses M1 plus less liquid forms of money, including savings deposits and time deposits, providing a more comprehensive view of the money supply. The growth in M2 reflects a healthy expansion of the financial system, supporting investment and lending activities across the region.

Quarterly Trends in Money Supply

Throughout 2024, the M2 money supply increased in all quarters compared to the corresponding quarters of the previous year. This consistent growth suggests a steady expansion of economic activities and liquidity in the market. In contrast, the M1 money supply recorded a decline in each of the first three quarters of 2023, primarily due to a decrease in the volume of cash deposits. However, the subsequent recovery in M1 during 2024 indicates a rebound in consumer spending and confidence.

Components of Money Supply

• Demand Deposits: These deposits saw significant year-on-year monthly increases throughout 2024, indicating a rise in consumer spending and business transactions.

• Quasi-Money: This category, which includes savings and time deposits, also posted notable monthly growth rates, though at a decelerating pace. The slowing growth in quasi-money suggests a shift towards more immediate forms of spending and investment.

• Currency in Circulation: The amount of physical currency circulating outside banks increased, but at lower rates than quasi-money. This indicates a growing preference for digital transactions and banking services over holding physical cash.

Implications for the GCC Economy

The rise in net foreign assets and the expansion of the money supply are indicative of a robust and resilient economy in the GCC region. These developments suggest that the central banks are effectively managing monetary policy to support economic growth while maintaining financial stability. The increased liquidity and foreign reserves position the GCC countries well to navigate global economic uncertainties and continue their development trajectories.

In summary, the financial data for 2024 highlights a period of significant economic growth and stability for the GCC countries, driven by strategic management of foreign assets and money supply. These positive trends are expected to contribute to sustained economic development and enhanced investor confidence in the region.