The Bank of Korea (BoK) is expected to remain on hold in the near-term, over rising concerns over the country’s household debt problem. The current loose monetary policy is further, expected to help cushion the headwinds to growth, helping the BoK from cutting rates any further.

Most importantly, political uncertainty is likely to hold back economic activity until a new president is elected. Uncertainty will delay investment and weigh on consumer confidence. In December 2016, consumer confidence fell to levels not seen since 2009, Fitch Ratings reported.

Furthermore, the bank lending survey has pointed to a marked deterioration in banks’ willingness to lend, which should weigh on credit growth in the months ahead. House price inflation is also slowing, but so far high-frequency data on building permits are not really pointing to any impending slowdown in construction activity. Corporate restructuring – notably in the shipbuilding industry – could weigh on non-construction investment.

"We do not expect political disruption to severely affect economic activity in the medium term, but Korea could be significantly impacted by a more protectionist world given the highly open nature of the economy," Fitch Ratings commented in its recent research note.