The finance minister of South Korea, Yoo Il-ho, mentioned on Wednesday that the economic scenario of the country is likely to deteriorate in the second half of 2016 given the volatile financial markets of China, UK’s EU referendum and the possibility of the US Fed to raise rates. Moreover, Yoo also noted certain domestic risks for the economic deterioration. He pointed towards the anti-corruption law, the end of tax cuts and corporate restructuring.

The finance minister has asked for an active policy response. South Korea is set to hold a country-wide shopping festival, Korea Sale FESTA, from 29 September to 31 October to attract foreign travellers and increase domestic consumption.

Meanwhile, the Bank of Korea governor Lee Ju-yeol said that the central bank should keep a close watch on unwanted impacts of quantitative easing such as an increase in household debt, overheating in the real estate market and foreign capital outflow. Lee has cautioned against increasing uncertainties in the Korean economy in the second half of 2016. Lee mentioned on Wednesday that uncertainties at home and abroad are increasing and might further rise after the UK’s vote on Brexit.

The South Korean monetary and fiscal policies are likely to remain expansionary in order to tackle the likelihood of increasing uncertainties, said Scotiabank in a research report. The Korea Customs Service reported that the country’s exports have declined 12.8 percent year-on-year to USD 25.66 billion in the initial 20 days of June. This hints at a continuously sluggish economic growth for the second quarter of 2016.

Meanwhile, if the UK votes to stay in the EU, the USD/KRW pair is likely to move downwards towards 1,125 level. But if Brexit happens, the currency pair might test the 1,200 handle, noted Scotiabank.