Weak Global Recovery To Weigh On S. Korean Economy In 2020: Moody's
Mohammad Ali (@ChaudhryMAli88) Published November 19, 2019 | 12:06 PM
The South Korean economy, along with many of its leading corporations, will continue to face headwinds next year due to weak economic growth and trade tensions, global rating agency Moody's Investors Service said Tuesday
SEOUL (APP - UrduPoint / Pakistan Point News - 19th Nov, 2019 ):The South Korean economy, along with many of its leading corporations, will continue to face headwinds next year due to weak economic growth and trade tensions, global rating agency Moody's Investors Service said Tuesday.
"Our outlook is negative. The overall profitability of export-dependent companies deteriorated in 2019 due to a global economic slowdown, but their financial stability weakened as they continue to maintain sizable investment," said Chris Park, associate managing director of corporate finance group at Moody's.
"There is a chance for improvement in 2020, but we believe the rate of improvement will likely be limited," he said in a press conference held shortly before an investor seminar at a Seoul hotel.
Of 24 South Korean companies rated by Moody's, 14 now have negative outlooks, he added.
This "reflects reduced financial buffers amid weak economic conditions, large committed investment or both," Moody's said in a press release.
South Korea's exports have dropped for 11 consecutive months since December, largely due to a slump in the global semiconductor market and the prolonged trade dispute between the United States and China, the world's largest importers of South Korean exports.
Park said the downturn in global trade will continue to negatively impact local industries, especially those that are in a down cycle, such as the semiconductor and chemical sectors.
"Trade disputes are expected to limit corporate profitability, and we expect the tech and chemical industries to be most affected," he said.
He noted the country's general government debt was expected to increase to around 42 percent of its gross domestic product (GDP) on a "large fiscal expansion proposed by the government in light of such growth conditions.
" It will still be in line with the average debt ratio of other international peers with "Aa" sovereign ratings, Christian said.
The Seoul government has submitted a bill, seeking a record high 513.5 trillion-won (US$439.4 billion) budget for 2020.
The amount, if approved by the parliament, will mark a 9.3 percent spike from this year.
Such an aggressive fiscal spending proposal comes amid concerns that Asia's fourth-largest economy may grow at less than 2 percent this year, marking its slowest growth in a decade.
The South Korean central bank predicted the local economy to expand 2.2 percent in its latest growth outlook published July that came after two earlier down revisions to 2.6 percent in January and 2.5 percent in April.
Guzman said South Korea's own trade tension with Japan may have introduced some level of new downside risks for the country but that it may not have too great an impact on the whole economy.
"There is little evidence showing disruptive effects of these disputes on the Korean economy," he told reporters when asked.
"When it comes to bilateral trade disputes, global trends are actually more important." On a similar note, Guzman said the down revision in South Korea's growth outlook may partly be attributed to a projected slowdown in China's economy, which he said is estimated to expand 5.8 percent on-year in 2020, slowing from this year's estimated 6.2 percent expansion.
Also, the slowing growth of China is "not primarily attributable to the U.S.-China trade tensions but also structural factors in China," he said. "And the sectors and countries that are exposed to China may face downward spillover risks."
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