The South Korean economy would have seen its bottom this year and likely pick up in 2020, albeit in slow pace, with deflationary dangers posing as its biggest challenge, according to global rating agency Standard & Poor’s (S&P) on Tuesday.
In a press conference in Yeouido, Seoul, on Tuesday, Shaun Roache, chief economist for the Asia-Pacific region at S&P Global Ratings, estimated recovery in Korean economy would be modest and gradual and warned deflation as the biggest risk to the Asia’s fourth largest economy.
Roache projected Korea’s growth at 1.9 percent for this year and 2.1 percent next year, little changed from S&P’s last outlook in October. The agency presented an economic growth outlook of 1.8 percent this year and 2.1 percent next year.
Roache noted that the Korean economy will rebound next year on the back of global monetary easing, partial trade agreement between the United States and China, and inventory rebound cycle in IT.
Investment and inflation will likely stay subdued, he said.
Roache predicted one or two additional rate cuts from the Bank of Korea to possibly visit a level under 1 percent for the first time ever.
He pointed to deflation as the biggest risk for the Korean economy and warned if price fall translates to cuts in wages, it could trigger off bust in colossal household debt bomb.
Seoul-based credit rating firm NICE Investors Service, which jointly held the press conference on Tuesday with S&P, expected Korean economy to grow 2.0 percent this year and 2.2 percent next year. It noted that the economy will continue with low growth and low interest rate environment due to sluggish construction investment and private spending.
While announcing risk outlook of 40 industry sectors for next year, NICE Investors Service said 17 areas faces challenging business environment and 23 keep their status quo.
The agency expected companies in 7 of the 40 industries to report poor results and 33 keep earnings at current level. NICE Investors Service cited zero will see improvement in earnings.
Choi Woo-seok, head of policy evaluation at NICE Investors Service, predicted chain downgrades in corporate debt ratings.
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