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Political uncertainty likely to hold back economic activity in Korea until new President comes in place, says Fitch Ratings

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.

Korea’s economy grew at a decent rate of 2.7 percent in 2016, though more slowly than what was anticipated in the last GEO (+2.9 percent). GDP growth was supported by strong government spending and by construction activity growing at unprecedented levels of 11 percent.

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, Fitch Ratings reported.

The construction boom has been fuelled by low interest rates and the relaxation of home-loan restrictions in 2014. Indeed, household debt grew at a strong 11.7 percent y/y in 4Q16.

"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," the report said.

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2017-03-23 08:00:49
0m

March 23 07:45 UTC Released

FRBusiness Climate

Actual

104 %

Forecast

107 %

Previous

107 %

March 23 07:00 UTC Released

TRConsumer Confidence*

Actual

67.8 %

Forecast

Previous

65.70 %

March 23 09:30 UTC 7575m

GBRetail Sales MM

Actual

Forecast

0.4 %

Previous

-0.3 %

March 23 09:30 UTC 7575m

GBRetail Sales Ex-Fuel MM

Actual

Forecast

0.4 %

Previous

-0.2 %

March 23 09:30 UTC 7575m

GBRetail Sales YY

Actual

Forecast

2.6 %

Previous

1.5 %

March 23 09:30 UTC 7575m

GBRetail Sales Ex-Fuel YY

Actual

Forecast

3.1 %

Previous

2.6 %

March 23 11:00 UTC 165165m

GBCBI Distributive Trades

Actual

Forecast

5 %

Previous

9 %

March 23 12:30 UTC 255255m

USJobless Claims 4-Wk Avg

Actual

Forecast

Previous

237.25 k

March 23 12:30 UTC 255255m

USInitial Jobless Claims

Actual

Forecast

240 k

Previous

241 k

March 23 12:30 UTC 255255m

USContinued Jobless Claims*

Actual

Forecast

2.035 mln

Previous

2.030 mln

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