Overseas IBs Continue to Downgrade South Korea's Growth Rate Amid COVID-19 Spread

"Q1 Economic Growth Rate Forecasted at -1%"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Overseas investment institutions are also continuously releasing pessimistic forecasts about the South Korean economy. This stems from concerns that domestic exports and the internal market will be directly hit due to the aftermath of COVID-19.

On the 24th, JP Morgan analyzed in its report titled "Spreading COVID-19: Peak of Infections and the Scale and Duration of Stock Market Adjustment" that "South Korea's COVID-19 situation will peak on the 20th of next month, with the maximum number of infected individuals reaching 10,000." This is based on the assumption that 3% of Daegu's 2.4 million citizens will be exposed to the virus, and secondary infections will occur in a pattern similar to China.

JP Morgan forecasted that South Korea's first-quarter economic growth rate will contract by 1% compared to the previous quarter due to the impact of COVID-19. The annual economic growth rate was also revised downward by 0.1 percentage points from the previous 2.3% to 2.2%.

They also predicted further declines in the KOSPI. JP Morgan explained, "The stock market movements caused by this COVID-19 outbreak are similar to those during the MERS (Middle East Respiratory Syndrome) period," adding, "During the MERS outbreak, the market underwent an adjustment for about three months."

Other foreign investment banks (IBs) have also been lowering their growth forecasts for South Korea one after another. ING Group lowered its growth forecast for South Korea this year from 2.2% to 1.7% within two months, down by 0.5 percentage points from the forecast presented in December last year. Oxford Economics also reduced South Korea's growth rate from 2.2% to 1.8%.

Lloyd Chan, an economist at Oxford Economics, stated, "COVID-19 has delivered a fundamental shock to China's economic activities and is expected to cause supply chain disruptions in the near future," adding, "South Korea's export outlook, which is strongly linked economically to China, will also weaken."

Some have projected South Korea's economic growth rate to fall into the 0% range this year. Nomura Securities lowered its forecast from 2.1% to 1.8% on the 18th, expressing concern that "if China continues its lockdown measures until the end of June due to COVID-19, South Korea's growth rate could plummet to as low as 0.5%." Morgan Stanley also forecasted South Korea's growth rate to range between a minimum of 0.4% and a maximum of 1.3%.

This content was produced with the assistance of AI translation services.