BoK's fiscal policy likely to remain proactive next year

BoK left its key policy rate steady at 1.5% today, consistent with the expectations. Korean government grew at 2.7% yoy in third quarter, rising from 2.2% in Q2.

The economy accelerated to 1.3%qoq in Q3, against 0.3% gain in the quarter and 0.3% in Q2, which indicates improving growth momentum.

Domestic consumption remains strong, even when exports dropped sharply due to global slowdown, because of government consumption growth of 1.7% qoq in Q3.

"For the whole year of 2015, we expect that Korea's economy will expand 2.5% y/y, down from 3.3% in 2014... as headwinds remain due to China's slowdown, fiscal policy will remain proactive in the coming year", says Commerzbank in a research note.