Understanding Saudi Arabia’s M3 Money Supply
Saudi Arabia’s M3 money supply has been on the rise since December 2022, according to data released by the Saudi Central Bank, also known as SAMA. The M3 money supply is the broadest measure of liquidity in the monetary system and reached SR2.61 billion ($697 billion) in the week ending June 1, up from SR2.5 billion on Dec. 31. Central banks use M3 money supply figures to direct monetary policy, thereby controlling inflation, consumption, growth, and liquidity over medium- and long-term periods.
What is M3 Money Supply?
M3 money supply is a measure of the money supply that includes cash, checking deposits, and easily-convertible near money. Near money includes savings deposits, time deposits less than $100,000, and money market deposit accounts for individuals. M3 money supply is used by economists to estimate the total amount of money in circulation within an economy.
The Importance of M3 Money Supply
M3 money supply is an important indicator of the health of an economy. It helps central banks to determine the level of liquidity in the economy and to make decisions about monetary policy. When the M3 money supply is high, it indicates that there is a lot of liquidity in the economy, which can lead to inflation if not managed properly. On the other hand, when the M3 money supply is low, it can indicate a lack of liquidity, which can lead to a recession or economic slowdown.
Saudi Arabia’s M3 Money Supply
Saudi Arabia’s M3 money supply has been on the rise since December 2022. According to data released by SAMA, the M3 money supply reached SR2.61 billion ($697 billion) in the week ending June 1, up from SR2.5 billion on Dec. 31. However, the money supply for the week ending June 1 dropped 0.29 percent compared to $2.62 billion in the week ending June 25. The SAMA data also showed that the money supply has been stable at SR2.6 billion in the past six weeks.
M2 Money Supply
In addition to M3 money supply, Saudi Arabia’s M2 money supply has also been on the rise since December 2022. The M2 money supply recorded a 4.53 rise compared to Dec. 31 and a 0.57 percent weekly increase. The M2 poses a measurement of the nation’s money supply that estimates all the cash individuals have in hand or short-term bank deposits. It is usually used to indicate possible increases or decreases in inflation levels.
M1 Money Supply
The M1 money supply comprises currency, demand and other liquid deposits. It contains currency and assets that can be quickly converted to cash. During the week ending June 1, the M1 money supply jumped 1.45 percent from the end of December 2022 and 1.52 percent against the preceding week.
Conclusion
Saudi Arabia’s M3 money supply has been on the rise since December 2022, reaching SR2.61 billion ($697 billion) in the week ending June 1, up from SR2.5 billion on Dec. 31. Central banks use M3 money supply figures to direct monetary policy, thereby controlling inflation, consumption, growth, and liquidity over medium- and long-term periods. In addition to M3 money supply, Saudi Arabia’s M2 and M1 money supplies have also been on the rise since December 2022. Understanding these measures of liquidity is important for economists and policymakers in making decisions about monetary policy and managing the health of an economy.