Macroeconomic Forecast South Korea

May 2008 | Macroeconomic Forecasts

BMI View: We see mounting threats to macroeconomic stability as concerns about FX borrowing could spur a further sell-off of the won, which would only exacerbate the current inflationary pressures in the South Korean economy. Continued weakness in domestic demand, in spite of an expansionary fiscal policy, will weigh on overall growth this year. We are more optimistic about external demand as export diversification has lowered South Korea's exposure to the US, meaning that South Korea should benefit from continued strong growth in China and other emerging markets. Overall, we view the risks to our 4.7% GDP forecast for 2008 as being on the downside.

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