International credit rating agency S&P lowered its South Korean economic growth forecast for this year from 2 percent to 1.8 percent in three months on Oct. 1 with the South Korean economy facing declines in exports and investment. The agency said that the prolonging trade war between the United States and China and the ongoing slowdown of the Chinese economy would put more and more pressure on the South Korean economy.
South Korea’s exports continued to fall on year from December last year to last month. Besides, the production capacity of the South Korean manufacturing sector fell for 13 months in a row, the longest since records began in 1972.
In August this year, Moody’s estimated South Korea’s economic growth rate for this year at 2 percent. “A global economic slowdown is hindering Asian countries’ exports and slower capital formation in trade-dependent countries such as South Korea and Hong Kong reflects their decrease in exports,” it said. Fitch Ratings’ estimate is 2 percent, too. “With the U.S.-China trade war escalating, U.S. tariffs targeting China will lead to a 0.5 percentage point decline in South Korea’s economic growth rate,” it explained.
Investment banks are lowering their estimates as well. For example, Bank of America Merrill Lynch adjusted its forecasts for this year and next year from 1.9 percent to 1.8 percent and to 1.6 percent on Sept. 4, respectively. The figures are 1.8 percent and 1.7 percent in the case of Morgan Stanley and 2 percent and 1.8 percent in the case of LG Economic Research Institute. This is very contrary to the South Korean government’s optimistic outlook. The government’s forecast for this year is 2.4 percent to 2.5 percent.