The South Korean third quarter economic growth decelerated to 0.4 percent on a quarter-on-quarter basis. The print implies that there is a considerable risk that the Bank of Korea will have to revise its growth projection during its next meeting in November, noted Barclays in a research report.
“We expect the BoK to downgrade its 2019 GDP growth forecast 30bp, to 1.9 percent (Barclays: 1.9 percent). We also believe the BoK will likely cut 2020 growth 10-20bp, to 2.3-2.4 percent, but it will likely flag significant uncertainties to the 2020 outlook”, stated Barclays.
The growth print is not expected to materially change the November policy rate decision. During the October rate decision, the board is likely to have taken some of the third quarter result into consideration.
“We expect the BoK to pause at 1.25 percent through 2020. However, we highlight three events that could prompt the BoK to adopt a more aggressive easing cycle: 1) a re-escalation of US-China trade tensions, tipping the global economy into recession; 2) production disruptions from the Korea-Japan trade spat; and 3) a large drop in Budget 2020 spending due to political disputes in the National Assembly”, added Barclays.
