|Standard & Poor's (S&P) Global Ratings' Asia-Pacific chief economist Shaun Roache speaks during a seminar at the Korea Federation of Banks' headquarters building in Seoul, Thursday. / Yonhap|
By Park Jae-hyuk
Standard & Poor's (S&P) Global Ratings hinted Thursday that it may lower its forecast for Korea's GDP growth rate for 2019 to below 2 percent if the ongoing trade feud between Korea and Japan continues to escalate.
The global ratings agency said that growing uncertainties resulting from the trade conflict are posing additional downside risks to Asia's fourth-largest economy.
The downbeat view came out a day after S&P slashed its growth forecast for Korea's economy for 2019 to 2 percent from its previous outlook of 2.4 percent in April.
In the Asia Pacific Quarterly published on Tuesday, the rating agency said high inventories, particularly in the electronics sector, and rising uncertainty about the global trade outlook will continue to weigh down production and private investment.
The report, however, did not reflect Japan's restrictions on exports that went into effect July 4, as S&P economists finished their research for the recent report in late June.
"We did not include the recent events between Korea and Japan," S&P Global Ratings' Asia-Pacific chief economist Shaun Roache told reporters during a press conference in Seoul. "As the uncertainties continue to rise, firms will face more uncertainties and be less likely to invest."
Although the economist remained cautious about stating the impact of the political dispute in exact numbers, he said the growing uncertainties will definitely increase downside risks to the Korean economy.
Since the Japanese government began tightening restrictions on semiconductor material exports to Korea, global credit rating agencies and investment banks have revised their forecasts for Korea's economic growth rate.
On Tuesday, Morgan Stanley lowered its forecast for Korea's GDP growth rate for 2019 to 1.8 percent from its previous outlook of 2.2 percent, saying "Constraints on input supply and higher input costs would likely place further pressure on the Korean economy, which is already facing external and domestic headwinds."
A report by Moody's published Monday also stated Japan's trade restrictions could "exacerbate the current slowdown in economic growth."
S&P analysts, however, said the ratings agency will not lower Korea's credit rating.
Kim Eng Tan, a senior director for S&P Global Ratings' sovereign ratings team in the Asia-Pacific area, said Korea's credit rating will be stable as the country's overall economic growth and foreign trade balance have been solid.