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SOUTH KOREA: Government Stimulus Rumours Rebuffed. 

SOUTH KOREA
EM BulletBulletSouth KoreaAPACEmerging Market News
  • The Chosun Daily reports that the “Korean Government is contemplating a supplementary budget for 2025 to counter weak domestic demand and a contraction in GDP.”.
  • President Yoon has long positioned himself as being fiscally prudent but may be forced into a more proactive fiscal response given the slowdown.
  • In September the government submitted to National Assembly a 2024 budget plan to the value of KRW677 trillion.
  • In the time since it’s submission the economic data has softened, prompting speculation for further fiscal intervention.
  • This week the IMF released their updated forecasts for Korea, downgrading their expectations for 2025.
  • Supplementary budgets would need to be funded via the bond market.
  • Currently the market has 75bps of monetary policy easing priced in.
  • The 2/10 Korean curve is very flat with only a 8bp premium for the 10-year over the 2-year (per BBG chart below), being historical lows .
  • New issuance would logically be longer and could see the Korean curve steepen should the stimulus be approved.
  • Claiming an exclusive, Chosun’s article may have touched a nerve as the Finance Minister in an emailed reply stated “South Korea’s finance ministry is not considering drafting extra budget for next year.” (per BBG)
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  • The Chosun Daily reports that the “Korean Government is contemplating a supplementary budget for 2025 to counter weak domestic demand and a contraction in GDP.”.
  • President Yoon has long positioned himself as being fiscally prudent but may be forced into a more proactive fiscal response given the slowdown.
  • In September the government submitted to National Assembly a 2024 budget plan to the value of KRW677 trillion.
  • In the time since it’s submission the economic data has softened, prompting speculation for further fiscal intervention.
  • This week the IMF released their updated forecasts for Korea, downgrading their expectations for 2025.
  • Supplementary budgets would need to be funded via the bond market.
  • Currently the market has 75bps of monetary policy easing priced in.
  • The 2/10 Korean curve is very flat with only a 8bp premium for the 10-year over the 2-year (per BBG chart below), being historical lows .
  • New issuance would logically be longer and could see the Korean curve steepen should the stimulus be approved.
  • Claiming an exclusive, Chosun’s article may have touched a nerve as the Finance Minister in an emailed reply stated “South Korea’s finance ministry is not considering drafting extra budget for next year.” (per BBG)