Korea's 2Q12 GDP to dip 2.6%

The recent 25bps rate cut is of little help.

According to BBVA Research, being heavily export-dependent, Korea’s economy is highly exposed to weakening external demand. With the economy slowing and inflation (2.2% y/y in June) remaining well within the official 2-4% target range, the Bank of Korea cut interest rates on July 12th by 25bps, the first easing move since 2009.

Here's more from BBVA:

The move came against weakening external demand, which resulted in a half percentage point lowering of the BoK’s full year forecast to 3.0% y/y (BBVA: 2.9% y/y). We expect a further slowdown in Korea’s second quarter GDP. Given recent fiscal stimulus measures and the likelihood of another rate cut during the year, we expect Q2 to reflect a bottoming out of growth momentum, although there are downside risks due to the weak external environment. We expect growth to slow to 2.6% y/y in the second quarter.