South Korea will be among the worst performing developed economies next year, Moody’s Investors Service said, cutting the growth estimate for Korea to 2.5 percent for this year and 2.3 percent for 2019.
The U.S.-China trade war is expected to intensify next year, which will deal a significant blow to Korea as its trade relies heavily on the two major economies, said Christian de Guzman, senior credit officer of Sovereign Risk Group at Moody`s, at a conference on Korea’s credit outlook held in Seoul on Tuesday.
The ratings agency projected the country’s economic growth to fall from 3.1 percent last year to 2.5 percent this year, lower than the Bank of Korea’s estimate of 2.7 percent. Growth for 2019 is expected to be even lower at 2.3 percent.
The country’s bleak economic sentiment and dismal job conditions were main causes for concern. Moody’s projected Korea’s unemployment rate to climb by 0.3 percentage point to 4.0 percent this year and to 4.1 percent in 2019.
Moody’s expected Korea and Japan to be especially hard hit from China’s economic slowdown and weakening global trade.
The rapidly aging population in the two countries would also weigh heavily on their future credit ratings, the agency stressed. In August, Korea officially became an “aged society,” in which the senior population aged 65 and older exceeds 14 percent of the total population. At this pace, government debt could reach 60 percent of Korea’s total gross domestic product by 2040, Moody’s warned.
By Chung Seok-hwan and Kim Hyo-jin
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