Fiscal Support And Growth Outlook
A supplementary budget is set to lift 2026 government spending to 752.1 trillion won, up 11.8% year-on-year. The package is projected to add 0.2 percentage points to GDP, and both parties planned to approve the bill by 10 April. Inflation risks may rise if energy prices stay high and fiscal measures add demand. The Bank of Korea’s policy attention is expected to focus on inflation stabilisation and financial stability. Demand for AI and memory chips is expected to stay strong, with AI investment continuing globally. This may add price pressure on IT goods and increase costs for consumers. The strong outlook for chip-led exports points toward opportunities in South Korean equity derivatives. We should consider long positions in KOSPI 200 futures or call options to gain exposure to the outperforming tech sector. Recent trade data for March 2026 confirmed this trend, showing semiconductor exports surged 45% year-on-year, their fifth consecutive month of double-digit growth. A sizeable supplementary budget, expected to be approved around April 10th, will provide a notable fiscal cushion for the economy. This government spending should help offset some of the headwinds from potential supply disruptions and support domestic sentiment. However, we are mindful that the overall 2026 growth forecast has been trimmed to 2.0%, suggesting this boost may prevent a contraction rather than fuel a major expansion.Rates And Currency Volatility
Persistent inflation will likely force the Bank of Korea to remain hawkish, focusing on stability over stimulating growth. With the latest March 2026 inflation data coming in at 3.4%, well above the 2% target, we see little chance of a rate cut in the coming months. This stance, similar to what we observed in 2025, suggests traders could position for higher yields by shorting Korea Treasury Bond futures. In the currency market, the Korean won is caught between strong export revenues and the burden of expensive energy imports. With Brent crude prices staying elevated above $95 per barrel through March, the outlook for the USD/KRW is uncertain, creating a case for increased volatility. We believe option strategies that profit from price swings, such as straddles, could be effective in the weeks ahead. Create your live VT Markets account and start trading now.
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