S&P lowers South Korea’s 2012 GDP growth forecast

Global credit rating appraiser Standard & Poor’s lowered Tuesday South Korea’s 2012 economic growth outlook to 2.5 percent, citing economic slowdown in China, delayed recovery in the US and the European fiscal crisis.

“We have lowered our base case forecast of 2012 real GDP growth by about half a percentage point for South Korea to 2.5 percent,” S&P said in a report titled “Asia-Pacific Feels the Pressure of Ongoing Global Economic Uncertainty”, reported Xinhua.

A trifecta featuring a slowdown in China, ongoing troubles in the eurozone and a weaker recovery in the US has led S&P to forecast lower economic growth rate, the report showed.

S&P forecast that the Chinese economy will grow 7.5 percent in 2012, saying that the China slowdown has a flow-on effect to the export-oriented Asian economies such as South Korea, Japan and Taiwan.

“Naturally, any worsening of the economic conditions in the Eurozone will increase contagion risk for Asia Pacific, given the region’s sensitivity to capital flows and trade,” said S&P credit analyst Andrew Palmer.

The S&P’s downgrade came after local think tanks and international agencies cut their growth outlook for South Korea. The International Monetary Fund (IMF) lowered last Friday its 2012 growth outlook for South Korea by half a percentage point to 3 percent.

The country’s state-run Korea Development Institute (KDI) slashed its outlook to 2.5 percent from an earlier estimate of 3.6 percent a week earlier.

Bank of Korea (BOK) has kept its 2012 growth outlook at 3 percent, but the central bank was widely expected to lower its outlook to the 2 percent range in October when it announces its revised outlook.