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| Finance Minister Hong Nam-ki speaks during a press conference at the Government Complex in Seoul, Friday. Despite Japan's export curbs, Hong said the government has no plan to revise its growth outlook for 2019, although global analysts expect Korea's GDP growth to be the slowest since the 2008 global financial crisis. / Yonhap |
Moody's expects GDP growth to be slowest since 2008 crisis
By Park Jae-hyuk
The Korean economy is expected to suffer its worst performance since the 2008 financial crisis in 2019 following Japan's decision Friday to remove Seoul from its "whitelist" of countries that receive preferential trade treatment, according to global economists, Sunday.
The decision means that Japan's exports of 857 "non-sensitive" strategic materials to Korea will be subject to a tougher approval process by the Japanese government.
A growing number of experts have warned therefore of possible material production disruptions in Korea's manufacturing sector, forecasting the country's annual growth rate will fall below 2 percent.
Korea's economic growth rate has not dropped below 2 percent since 2009, when the country's annual GDP advanced a meager 0.8 percent in the aftermath of the global financial crisis.
"The current escalation in trade tension with Japan could exacerbate the current slowdown in Korea, for which we project the slowest pace of real GDP growth since the global financial crisis," said Christian de Guzman, the senior vice president of Moody's Investors Service's sovereign risk group.
Another analyst at the global credit rating agency said Japan's removal of Korea from its "whitelist" is "credit negative" for many Korean companies in the industrial sector.
"This measure effectively expands the scope of Japan's export controls introduced in early July on semiconductor and display inputs, and further increases uncertainty around the ability of Korean companies to secure key materials essential to their production processes in a timely manner." Moody's analyst Sean Hwang said in a press release issued Friday.
The agency's forecast for Korea's GDP growth rate for 2019 has stood at 2.1 percent, since it slashed its outlook in March.
The analysts' remarks, however, imply that a further downward revision is possible.
Other global credit rating agencies have already hinted they may lower their forecasts for 2019 to below 2 percent.
Standard & Poor's (S&P) Global Ratings, which slashed its growth forecast to 2 percent in July, said growing uncertainties resulting from the trade conflict are posing additional downside risks to Asia's fourth-largest economy.
Fitch Ratings, which cut its 2019 forecast to 2 percent in its June report, said Japan's imposition of restrictions adds yet another headwind to Korea's growth outlook
Investment banks have been more certain about the bleak outlook.
Standard Chartered, IHS Markit, ING Group, Nomura Securities, Morgan Stanley and Bank of America Merrill Lynch are among global institutions that say the economy will grow below 2 percent.
Their views have been shared by economists here.
"Korea's economic condition has already deteriorated severely," said Sung Tae-yoon, an economics professor at Yonsei University. "The nation's economic growth rate in 2019 will not be able to exceed 2 percent, if Seoul and Tokyo continue their bilateral economic retaliation."
However, the Korean government is still optimistic about economic growth.
On the day the Japanese government delisted Korea, Finance Minister Hong Nam-ki said the government has no plan to revise its growth outlook.
The government slashed its economic outlook for 2019 to the range of 2.4 percent to 2.5 percent in July from its previous 2.6 percent to 2.7 percent.





































