South Korea lowers growth forecast amid trade tensions

MR KIM DONG-YEON
MR KIM DONG-YEON

SEOUL • South Korea's Finance Minister Kim Dong-yeon yesterday warned that an all-out trade war between the US and China would have grim implications for the country, as he lowered this year's growth outlook.

The world's 11th largest economy is expected to grow 2.9 per cent this year, lower than an earlier estimate of 3 per cent, Mr Kim said, citing slowing demand at home and abroad as well as rising unemployment.

The latest estimate is also lower than last year's figures, when the export-reliant economy expanded 3.1 per cent, and comes as South Korea's top two trading partners China and the United States engage in a bitter spat that has seen them impose hefty tariffs on billions of dollars in goods.

"The economic situation down the road does not seem to be bright," Mr Kim told reporters. "The situation may get worse if anxiety in the international financial markets spreads due to the US-China trade dispute... and market and corporate sentiment does not improve."

Overseas shipments account for more than half of the South's economy, with more than a quarter of exports shipped to China and about 12 per cent to the US.

Mr Kim vowed to "closely monitor international trade situations including the US-China trade row" and announced measures to encourage job creation and spur domestic spending.

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The economic situation down the road does not seem to be bright. The situation may get worse if anxiety in the international financial markets spreads due to the US-China trade dispute... and market and corporate sentiment does not improve.

MR KIM DONG-YEON, South Korea's Finance Minister.

US President Donald Trump has taken a confrontational "America First" stance on trade policy, imposing steep tariffs on steel and aluminium, which angered allies and prompted swift retaliation, as well as 25 per cent duties on US$34 billion (S$46 billion) of Chinese goods, with more on the way.

China has matched US tariffs dollar-for-dollar and threatened to take further measures, while US exports face retaliatory border taxes from Canada, Mexico and the European Union.

The International Monetary Fund this week said the growing trade confrontation is the "greatest near-term threat to global growth" and in the worst case could cut a half point off world GDP.

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A version of this article appeared in the print edition of The Straits Times on July 19, 2018, with the headline 'South Korea lowers growth forecast amid trade tensions'. Print Edition | Subscribe