Korea's 2013 fiscal front-loading target ratio set at 60%

Here's what this could mean.

According to Nomura, since the 2008 global financial crisis, Korea‟s government has spent about 60% of its annual expenditure budget in H1 to support domestic demand (for example, 60.8% and 60.1% in 2010 and 2012, respectively).

This year, the government‟s fiscal front-loading target ratio is also set at 60%.

Here's more from Nomura:

We expect government consumption to increase by 3.1% (sa) q-o-q in Q1 and contribute 0.4 percentage points to our 0.7% Q1 2013 GDP growth forecast.

Due to this fiscal front-loading, Q2-Q4 2013 GDP will likely be dependent upon private sector domestic demand and exports, on which we are sanguine. We expect global demand, especially from the US, euro area and Japan, to improve in Q2-Q4 on a sequential basis, supporting Korea‟s exports and investments.

We maintain our call for the Bank of Korea to keep rates unchanged at 2.75% throughout 2013. Also, although this is not our base case, if the new government formulates a supplementary budget, upside risks to our 2.5% 2013 GDP growth forecast would increase and the likelihood of a rate cut would lessen.

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