Moody's said that Japan's semiconductor material export restrictions can have a negative impact on South Korea's economic growth rate, which is estimated at 2.1 percent and 2.2 percent for this year and 2020, respectively.
“Disputes surrounding war damage compensation have led to the restrictions on exports of semiconductor materials to South Korea,” the international credit rating agency said in its annual credit analysis report on July 8, adding that the restrictions could exacerbate the current slowdown of the South Korean economy. The agency lowered its South Korean economic growth forecast for 2019 from 2.3 percent to 2.1 percent in March this year.
“South Korea has been periodically going through tensions in its relations with surrounding powers such as China and Japan and the export restrictions are another political risk as in the case of China’s THAAD retaliation in 2016,” the agency went on to say.
Still, Moody’s maintained its credit rating and credit rating outlook for South Korea at Aa2 and Stable, respectively. “Despite the geopolitical tensions and shrinking external demands, South Korea’s economic and fiscal fundamentals are very strong,” it said, adding, “The tensions including North Korea issues and potential economic and fiscal costs attributable to its rapidly aging population can be mentioned as factors that can negatively affect its credit rating down the road.”