n Global economy
Moderate recovery likely amid subpar growth
n US economy
Warmup period to begin after passing inflection point
n Chinese economy
All set for recovery
n Korean economy
Full-swing recovery to begin in 4Q09
n KRW/USD rate and oil price
Fatal disturbance hardly likely
Sangjae

CONTENTS
4
6
15
29
Real Economy Has Passed Inflection Point; Warmup Period Expected in 2H09
Two Challenges for
Global Economy after Crisis
US Economy to Evolve in
Three Steps; Warmup Period
Expected in 2H09
Chinese Economy Poised
to Revive in 2H09
Fig 1: US financial conditions index recovered to pre-Lehman Brothers levels in 2H-May 2009
Fig 2: US consumer confidence index recovered to pre-Lehman Brothers levels in May 2009
Fig 3: Post-crisis global economy: Moderate recovery amid sub-par growth expected
Fig 4: Global economy to undergo final stage of ‘3R’ pattern in 2H09
Fig 5: Global GDP likely to fall significantly short of growth trendline in 2009-10
Fig 6: Advanced and developing economies alike to see moderate recovery in 2010
Fig 7: US household credit spending capacity to fall on drop in real and financial asset value
Fig 8: Household savings rate to take upturn amid continuing massive layoffs
Fig 9: Structural imbalance to ease from 2H09gHigh US household debt to diminish
Fig 10: Structural imbalance to ease from 2H09gHuge US account deficit to shrink
Fig 11: Savings rate gap between US and non-US economies to narrow
Fig 12: Global economic growth’s increasing dependency on demand outside US
Fig 13: US economy’s dependency on financial sector expanded in 2000s
Fig 14: S&P 500 financial stock market cap growth vs. that of nonfinancials
Fig 15: Post-crisis US economy to evolve in three steps
Fig 16: Leading indicators to improve as US economy passes inflection point in 1H09
Fig 17: Coincident indicators to pass trough during warmup period in 2H09
Fig 18: Ignition phase in mid-2010; US lagging indicators to turn around gradually
Fig 19: Factor 1 for continued US recession in 2H09: Profit margins to continue to weaken
Fig 20: Weak margins to cause prolonged belt-tightening by companies
Fig 21: Factor 2 for continued US recession in 2H09: Unemployment claims at record high
Fig 22: US consumption choked by sluggish labor income
Fig 23: Development 1 in US housing: Slump to ease in 1H09
Fig 24: Development 2 in US housing: Home sales recovery mid-2H09
Fig 25: Development 3 in US housing: Home price to bottom out at end-2009
Fig 26: US manufacturing sector carried out rapid inventory de-stocking in 1Q09
Fig 27: Restocking to increase production pressure
Fig 28: Inventory cycles by US manufacturing industries
Fig 29: Pent-up demand in US consumption reached record high in 1Q09
Fig 30: US consumption recovery in latter part of 2H09
Fig 31: Upward pressure on US facility investment hit record high in 1Q09
Fig 32: Likelihood of US facility investment recovery to increase in 2H09
Fig 33: US monetary base almost doubled since 4Q08
Fig 34: US financial intermediary functions and effect of interest rate cut in 2H09
Fig 35: In USD789.2bn US stimulus package, 2010 spending larger than 2009’s
Fig 36: Slim chances of 2H09 double dip for US economy
Fig 37: Real US GDP continued negative growth in 1H09
Fig 38: Real US GDP may fall below 2008 level in 2009-10
Fig 39: Anticipation for US economic recovery expected to increase in 2H09
Fig 40: Domestic demand to continue recovery, driven by government investment
Fig 41: Fixed asset investmentgContrast between export and domestic-demand sectors
Fig 42: Adjustments of capital requirement ratios for fixed asset investments indicated that
the government’s policy support will continue
Fig 43: Growth in manufacturing and facility investment rebounded despite flagging exports
Fig 44: Liquidity supply to continue in 2H09, inducing aggressive government spending
Fig 45: New loans to drop sharply due to seasonality in 2H09
Fig 46: Growth of loans to private companies and consumers to accelerate
Fig 47: Consumer loan growth to serve as a driving engine for domestic consumption
Fig 48: 2H09 industry production to recover gradually due to reduced inventory burden
Fig 49: Relatively solid domestic demand; Export-related trade volume established bottom
Fig 50: Exports of low-end consumer products continue to show relative strength
Fig 51: Trading terms for exporting companies to improve significantly
Fig 52: Real estate to hit trough earlier than expected due to recovery in transaction volume
Fig 53: Liquidity injection and recovering market sentiment slowing real estate price drops
Fig 54: Inventory burdens to decline 50% or less in metropolitan areas
Fig 55: Sluggish housing construction starts indicate 2H09 easing of supply burden
Fig 56: Chinese economy to recover to 8-9% growth rate in 2H09
Fig 57: Fixed asset investment cycle during past economic crisis
Fig 58: Note urban household expenditure trends as leading indicator for 2H09 consumption
Fig 59: Chinese exports to turn to grow in 4Q09 amid uncertainties
Fig 60: Current recession has a different cause from past ones
Fig 61: Rapid contraction of exports and domestic demand caused current recession
Fig 62: Latest dip in consumption not due to consumer credit spending bubble as in 2003
Fig 63: Consumption dip caused by low exports and employment, bad external conditions
Fig 64: Facility investment/GDP was 14.6% in mid-1990s, while only 8.9% in 2008
Fig 65: Quarterly avg. mortgage loans up KRW36.7tr in ’02-04 but only 14.3tr in ’07-08
Fig 66: 2H09 economy to rebound on export recovery, closely correlated with OECD CLIs
Fig 67: Diversified export destinations to boost exports in 2H09
Fig 68: Daily average exports took a marked upturn in Apr
Fig 69: 2009 export/import and trade account forecasts
Fig 70: 1Q09 inventory cycle; Drastic inventory adjustment
Fig 71: Leading economic indicators on steep rise in 1Q09
Fig 72: Shipment and inventory trend by industry as of 1Q09
Fig 73: Deflation gap to persist in 2H09; Base interest rate unlikely to be raised
Fig 74: 2009 operational budget balance to be in the red (3.9% of GDP)
Fig 75: Public debt/GDP only half of OECD average; Fiscal expansion policy likely to persist
Fig 76: Real GDP’s YoY growth to be exposed to strong positive effect in 4Q09
Fig 77: Economic recession to hit bottom in 1Q09
Fig 78: Full-fledged economic turnaround to take place in 4Q09
Fig 79: Real GDP to turn positive in 4Q09 by growing 2.9%YoY
Fig 80: End-2009 KRW/USD rate estimate lowered to KRW1,180 from KRW1,220
Fig 81: US IRS spread fell in May to level before collapse of Lehman Brothers in Sep 2008
Fig 82: Surge in KRW/USD rate on worsening of capital and financial account unlikely in 2H09
Fig 83: US dollar to be weak in 2H09 due to large fiscal deficits in US
Fig 84: US dollar unlikely to plunge considering the slow growth of the global economy
Fig 85: Cumulative current account surplus to weigh on the KRW/USD rates in 2H09
Fig 86: Capital and financial account to improve and lower the KRW/USD rates in 2H09
Fig 87: Commodity prices under gradual upward pressure since 1Q09
Fig 88: 2H09 movement in international oil prices depend on speculative demand
Fig 89: Rise in 2H09 international oil pries to be limited, given ample crude oil inventory
Fig 90: Noteworthy variables from 2009 (1)gUS TIPS spread trend
Fig 91: Noteworthy variables from 2009 (2)gLong-term inflation expectations
Fig 92: Short-term capital trended up rapidly from early 2008; Up KRW167.6bn
Fig 93: Forecasts on major indicators for Korean economy
Fig 94: Forecasts on major indicators for global economy

Real Economy Has Passed Inflection Point;
Warmup Period Expected in 2H09
Two major challenges left for global economy after financial crisis
In 1H09, governments around the world successfully kept the financial system from collapsing and
quelled the panic prevailing in the private sector. The challenges remaining for the global economy
after overcoming the financial crisis are inducing an economic recovery in cyclical terms and laying
the foundation for long-term growth by resolving structural imbalances. We expect the global
economy to lay the foundation for a recovery in 2H09 along with the completion of inventory
adjustments and the release of pent-up demand, while the substantial economic stimulus measures
currently in place gradually take effect. On the structural side, the global economy is expected to
take the first step toward resolving the imbalance issue based on a recovery in the US household
savings rate, the resolution of the current-account imbalance between the US and other countries,
and mitigation of the imbalance in contribution to economic growth by financial and nonfinancial
sectors. However, the 2H09 global economy will likely feature a moderate recovery amid subpar
growth, in that the process of resolving the structural imbalance may limit the extent of recovery.
US economy to enter warmup period in 2H09
The US economy, at the center of the 4Q08 financial crisis, is projected to go through three stages:
1) a 1H09 inflection point, where the intensity of recession eases; 2) a warmup period in 2H09, with
building anticipation for recovery; and 3) a period of ignition in 2010, where economic recovery
materializes. Palpable recovery in consumer and business confidence and in leading economic
indicators is already taking place at the economic inflection point in 1H09. Coincident indicators
such as industrial production, capacity utilization rate, and non-farm payrolls should reach the
trough in 2H09. And lagging indicators such as unemployment rate, inventory-to-shipment ratio,
and delinquency ratio, should start improving in 2010.