FXStreet (Guatemala) – Analysts at Nomura explained that South Korea President Park yesterday nominated Mr. Yoo, Il Ho for the new finance minister to replace Mr Choi Kyoungwhan.
Key Quotes:
“Mr Yoo is currently a member of the National Assembly from the ruling Saenuri party. He worked briefly as Minister of Land, Transportation and Maritime Affairs in 2015. Before that, he worked with the Korea Development Institute and Korea Institute of Public Financing, specialising in fiscal and tax policies. We will have much more information about his views and policy biases during the upcoming hearing in front of the National Assembly in January 2016. He said yesterday that he will follow the 2016 economic policy plan which was already announced last week.
At this juncture, we do not expect any major shift in economic policy. However, we assume that he may see more room for monetary easing than fiscal stimulus if the country needs to respond to weaker growth. This is because he is quite aware of Korea’s long-term fiscal challenges from ageing population, increasing demand for social welfare budget and the contingent fiscal burden from a potential reunification with North Korea.
We expect Korea’s real and nominal GDP growth in 2016 to be 2.5% and 3.5%, respectively, which are far short of the government forecasts of 3.1% and 4.5%. In this base case, we maintain our out-of-consensus call that the Bank of Korea (BOK) will cut policy rates by 25bp to 1.25% in February and further to 1.00% in June 2016, in an effort to achieve the government’s 5% nominal GDP growth target and the BOK’s 2% CPI inflation target.”
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