South Korea: Policy support is coming – ANZ

The South Korean government today unveiled a supplementary budget proposal worth KRW11.7trn, including KRW8.5trn (0.4% of GDP) in new spending.  Analysts at ANZ Research continue to expect the Bank of Korea (BoK) to cut its policy rate to complement the fiscal push.

Key quotes

“The BoK today held an emergency meeting following the US Fed’s unscheduled 50bps rate cut overnight, but opted not to pursue a rate move of its own.”  

“The escalating COVID-19 outbreak and the associated rise in growth risks and pressure for a coordinated global response will make it difficult for the BoK to stay on the sidelines for long, in our view.” 

“Unless the virus outbreak shows clear signs of peaking in the coming weeks, we continue to believe that a further rate cut by April to complement the fiscal push is more likely than not.”

“The South Korean government last week signalled plans for a supplementary budget and today unveiled more details.  The proposed budget is worth KRW11.7trn, and comprises KRW8.5trn (0.4% of 2019 GDP) in new spending and KRW3.2trn for a tax shortfall.”