South Korea to boost growth through expansionary budget

SEOUL – The Korean Finance Ministry’s 2015 Government Budget proposal to be submitted to the National Assembly by September 23, is expansionary, and will likely lift 2015 GDP growth by 0.2%, according to ANZ Bank which has revised upwards its forecast of 2015 GDP growth rate to 3.9%.

Compared with the original budget outlined in the 2013-17 medium term fiscal plan, the approved budget increases spending by KRW7.6 trillion, ANZ says, adding that it is expected the expansionary fiscal budget will involve revenue shortfall. “This suggests that the Government may need to be financed through deficit-covering bonds.
“Against this backdrop, the BOK would be required to cultivate a low interest rate environment and continue its accommodative monetary policy stance. Therefore, the BOK will likely ease again in Q4 and may cut rates as soon as October. The base rate will likely end at 2.00% in 2014, and is expected to stay through to Q4 2015,” ANZ says. www.live.anz.com (ATI).