Korea Adjusts GDP/Inflation Forecasts, Announce Reforms

The South Korean government lowered its GDP forecast for 2022 to 2.6% (from 3.1%), while raising its inflation forecast to 4.7% from 2.2%. It also announced a number of reforms to boost the private sector.

• The government's forecasts are close to the BoK estimates for 2022. The government has been highlighting the challenges faced in the current economic climate.
• To this end, the new Yoon led government announced a series of reforms to revitalize the private sector. The corporate tax rate will be cut to 22% from the previous 25%. It also plans to expand tax incentives for investments in key sectors - like semiconductors.
• Capital gains tax will also reportedly be cut for most stock investors, while onshore FX trading will be expanded to 2am onshore time, with an eventual plan to have 24 hours trading.
• The initial market reaction has been muted. The Kospi is back to nearly flat on the day, after tracking +2% earlier. Regional sentiment has turned softer though and US equity futures have dipped into the red.
• 1 month USD/KRW continues to climb, into line with a rebound in USD sentiment. We sit back close to 1288, which is +0.70 above NY closing levels.