July 11, 2019 10:06
Standard & Poor's on Wednesday slashed Korea's economic growth forecast for this year from 2.4 to two percent. The credit ratings firm said Korea's credit cycle is "turning negative" as "the credit quality of Korea's top 200 companies has weakened as a result of rising debt and stalled earnings in 2018."
S&P forecast that Korea's export-dependent businesses will be directly impacted by the U.S.-China trade war and Japanese curbs on shipments of high-tech materials.
It added that industries such as semiconductors, smartphones, automobiles and petrochemicals will face difficult conditions over the next one or two years. For the first time since 2015, more Korean businesses had their credit ratings slashed than raised in the first half of this year, and that will continue for the time being, it said.
The world's three top ratings firms have now all slashed Korea's growth projection to just above two percent between them. In March, Moody's lowered Korea's growth forecast to 2.1 percent, and Fitch followed suit with two percent last month.
Investment bank Morgan Stanley cut its outlook for Korea from 2.2 to 1.8 percent citing the impact of Tokyo's export restrictions on key industries including semiconductors and displays. Last month, Goldman Sachs and JP Morgan lowered their outlook for Korea to 2.2 percent.
The government held out hope of a recovery in the second half of this year until it reluctantly cut its own outlook from 2.6 to 2.7 percent to 2.4 to 2.5 percent this month, but that is probably still too rosy.
Bank of Korea Governor Lee Ju-yeol said recently, "Global trade could shrink due to the prolonged U.S.-China trade war, and forecasts of a slower-than-expected recovery in the semiconductor industry are gaining more weight."
The BOK is expected to lower its forecast for this year further from the present 2.5 percent.
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