Korea's GDP growth forecast tweaked down to 2.8%

Is it a good sign?

According to DBS, GDP growth forecasts have been tweaked to 2.8% for 2013 (from 3.0%) and 4.0% for 2014 (from 3.9%).

DBS is still comfortable about the relative performance of Korean exports, despite a challenging global environment and the threat of JPY weakness.

The non-price core competitiveness of Korean exports remains intact, especially in the electronics sector (a large share of 30% in total exports).

Here's more from DBS:

Meanwhile, domestic demand is expected to pick up in the next two quarters, on the back of supportive government policies including the KRW 7.3trn supplementary budget and temporary reductions of real estate acquisition tax. The Bank of Korea also cut rates by 25bps in May and lifted the quota of special SME loans.

Growth numbers so far are still on track to reach the central bank’s forecast of 0.8% QoQ sa in 2Q and 1.0% in 3Q-4Q. Export growth picked up slightly in Apr-May, industrial production rebounded and PMI held up above 50.

For now, policymakers would focus on implementing the extra budget and assessing the effects of the recent monetary easing, rather than adding new stimulus measures. We expect the BOK to keep rates unchanged at 2.50% at the MPC meeting this Thursday.

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