Growth Moderation Playing Out

The South Korean economy cooled in Q211, with real GDP growth coming in at 3.4% quarter-on-quarter annualised, down from 5.3% in Q111. This decline in momentum is in line with our view that full-year growth will come in at 4.0% (versus consensus expectations of 4.3%). A weaker growth outlook for export sector in 2012, owing largely to our view of a slowdown in China and increasing headwinds facing the domestic consumer from mounting consumer debt should also weigh on growth in 2012, and we have revised down our growth forecast for next year slightly from 4.7% to 4.0% in light of these growing concerns.

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