Here's what to expect from South Korea's fiscal policy amid new government

Nomura predicts rates will be unchanged at 2.75%.

According to Nomura, the presidential inauguration on 25 February will see President-elect Park Gun-Hye take office, with Hyun Oh-Seok as her chosen

finance minister and Cho Won-Dong as presidential economic advisor. Nomura expects the new government to announce fiscal stimulus measures as early as in March.

Here's more:

As domestic demand remains weak, we expect stimulus measures to target specific areas such as the property market, small and medium-sized enterprises (SMEs), and low-income families:

Stimulating the property market: To stimulate property transactions, we expect the new government to cut property holding, transaction and capital gains taxes, lower the loan-to-deposit (LTV) and debt-to-income (DTI) ratios, and facilitate renovation and reconstruction activity.

Supporting SMEs: Favourable tax benefits for SMEs are likely to be introduced to provide them financial support.

Helping low-income families: We expect increased social welfare expenditure for low-income families and believe oldage benefits are likely to be introduced.

We do not expect the Bank of Korea (BOK) to cut rates this year as GDP growth bottomed out in Q3 2012, supported by stronger exports on improved global demand.

The BOK‟s current policy rate of 2.75% is a full percentage point lower than our 3.8% estimate of a neutral rate, meaning that maintaining current policy settings ought to be accommodative enough to support domestic demand

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