Korea GDP forecast to slip to 2%

While inflation edged up to 2% from 1.2% because of food and oil price hike.

According to DBS, the Bank of Korea will again review its economic forecasts this week. The 2012 GDP estimate will be cut further to the 2% level from 3.0%.

Here's more from DBS:

Admittedly, CPI inflation rebounded to 2.0% YoY in September from 1.2% in the previous month, due to higher food and oil prices. The rise in domestic food prices caused by typhoons was a one-off phenomenon, which shouldn’t worry the central
bank.

Global oil and commodity prices have also stabilized since mid-September, alleviating the concerns about imported inflation as a result of US QE3.

On the data front, bank loans and money supply will be released today ahead of tomorrow’s BOK meeting. While the overall loan growth (5.3% YoY in August) has been healthy compared to nominal GDP growth (3.4% in 2Q), it was largely driven by loans to large companies (35.4% in August).

Lending to small enterprises has remained sluggish ever since 2010, due to the fallout from global financial crisis and the deleveraging pressures in the SME sector. Household loans have also slowed this year, as policymakers tightened regulations on household borrowings and the residential property market has turned weak.

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