Macroeconomic Forecast South Korea

June 2006 | Macroeconomic Forecasts

BMI View: Key government departments and the IMF arestubbornly bullish toward Korean growth prospects, with the Fund even uppingits 2006 growth forecast in April from 5.0% to 5.5%. However, optimisticforecasts from both the Bank of Korea and Ministry of Finance are underincreased scrutiny. While we retain our 5.2% full year growth forecast, webelieve that Q106 (6.1% y-o-y) growth likely represents the yearly peak. Thegovernment is sensitive to such projections, and has roundly rejected thenotion that growth will decelerate in Q406. The surprise June interest ratehike suggests otherwise. Indeed the hike may represent a bid to tightenpolicy in advance of a

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