GCC countries continue to have ample liquidity to finance the large investment projects planned over the next few year, QNB Group said in its weekly analysis. GCC liquidity, as measured by the money supply (M2), increased by 11.9 percent year-on-year (y-o-y) during the first quarter of 2013 to reach $860 billion. This represents a further increase in the growth of M2, compared with 2012 (10.4 percent). Higher energy prices and increased hydrocarbons production are feeding through to the non-oil sector through higher liquidity. This higher growth in the GCC money supply enables the private sector to expand economic activity. The narrower definition of the money supply (M1) in the GCC increased rapidly (16.8 percent) during the first quarter of 2013, while medium term deposits (quasi-money) went up more moderately (7.7 percent). The main reason behind a higher increase in the narrower definition of the money supply is associated with the low interest rate environment that has been prevalent in recent years, which encourages depositors to hold short-term deposits. According to QNB Group, Qatar recorded the highest money supply growth rate in the region during the first quarter of 2013 (37.4 percent). During the first quarter of 2013, the money supply growth was mainly driven by higher private sector deposits, while in 2012 it was due to foreign currency deposits from the public sector. This reflects a significant shift in trend, compared with the traditional source of money supply growth in Qatar, which may indicate a higher growth contribution from the non-oil sector.