How severe is Korea’s slowdown likely to be?

GDP growth in Korea probably slowed in Q2 and is likely to stay on a weaker track in coming quarters. The economic upswing should not come under serious threat, but exports and manufacturing growth will almost certainly ease due to the tougher conditions in the highincome economies and in the rest of Asia which are on the way. Moreover, the relatively high level of local private sector debt will probably subdue household spending. The upshot is that, after a strong expansion this year, we expect GDP growth to slow to a sub-trend pace in 2011.