SEOUL– Global credit appraiser Fitch Ratings said Friday it has cut its 2021 growth outlook for the South Korean economy to 4 percent due mainly to the latest surge in COVID-19 cases.
The latest outlook is a 0.5 percentage-point drop from its earlier estimate of 4.5 percent growth for Asia’s fourth-largest economy.
“We expect (Korea’s) GDP growth to lose momentum on a sequential basis in the third quarter of 2021,” Fitch said in a report on the global economic outlook.
“Nevertheless, the fast pace of the vaccine rollout means that prospects for the economy heading into the fourth quarter and 2022 remain favorable,” it added.
Despite the downward revision, Fitch’s outlook is on par with the forecast of the Bank of Korea (BOK). The Korean government expects growth of 4.2 percent this year.
Asia’s fourth-largest economy is on a recovery track on the back of solid exports.
“Exports growth will likely weaken in the coming months as demand for durable goods fades, but huge backlogs of orders will keep Korean manufacturers busy,” Fitch said.
The Korean economy grew a revised 0.8 percent in the second quarter from three months earlier, slowing from a 1.7 percent on-quarter gain in the first quarter.
The ratings agency said the BOK is expected to raise the benchmark interest rate by a quarter percentage point one more time this year and hike it twice next year.
In August, the BOK raised the policy rate by a quarter percentage point to 0.75 percent from a record low of 0.5 percent, marking the first pandemic-era rate hike.
In July, Fitch maintained its credit rating for South Korea at “AA-,” the fourth-highest level of the agency’s sovereign ratings table, with a stable outlook.
Source: Yonhap News Agency