The United Nations Conference on Trade and Development (UNCTAD) released this year’s Trade and Development Report on Sept. 29. In the report, the United Nations estimated this year’s global economic growth rate at 2.3 percent, the lowest in 10 years, and said that things are unlikely to get better next year due to the ongoing trade war between the United States and China.
The International Monetary Fund (IMF) recently warned that the total GDP of the world will fall 0.8 percent if the trade war continues. At present, the trade war is escalating into a financial war, continuing to affect the outlook of the global economy.
Both the real economy and the financial sector of South Korea are likely to take a direct hit under the circumstances in that it is heavily dependent on exports and it is one of the countries most affected by the U.S. and Chinese economies. Last month, the Bank of Korea explained that South Korea’s non-ship export volume index fell 3.3 percent on year in May and fell 7.3 percent on year in June after increasing 2.2 percent on year in April immediately before the escalation of the trade war.
Research institutes both at home and abroad are lowering their South Korean economic growth estimates. According to Bloomberg, the average estimate of 42 institutes is 2 percent for this year and 2.2 percent for next year and the figures can be adjusted to less than 2 percent within this year. International credit rating agency Fitch Ratings recently pointed out that the conflict between the United States and China would lead to a 0.5 percentage point decline in South Korea’s economic growth rate.
Uncertainties in the South Korean financial markets are likely to keep increasing until U.S.-China trade negotiations take some concrete shape next month. In addition, the impeachment inquiry against U.S. President Donald Trump that started on Sept. 24 has adversely affected the markets since Sept. 25. Also, the South Korean stock market, which is closely correlated with the Chinese stock market, is likely to be jolted as the United States puts more and more financial pressure on China.