💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

Deflation pressure is biggest domestic risk to South Korea: S&P

Published 09/25/2019, 03:13 AM
Updated 09/25/2019, 03:16 AM
Deflation pressure is biggest domestic risk to South Korea: S&P

By Choonsik Yoo

SEOUL (Reuters) - Deflation pressure is the biggest domestic risk facing South Korea's economy and its central bank should cut interest rates aggressively, a senior economist at credit rating agency S&P told Reuters on Wednesday.

Shaun Roache, Asia Pacific chief economist at S&P Global Ratings, also said during an interview in Seoul that the rating agency would trim its forecasts on South Korea's economic growth for this year and 2020 as soon as next week.

He said S&P's revised forecasts for South Korea's economic growth would be around 1.9% for this year, versus 2.0% seen previously, and about 2.2% for next year, down sharply from 2.6% seen before.

"I think the main domestic risk to Korea is low inflation, and deflation," Roache said. "I think it is a problem that the BOK (Bank of Korea) is not meeting its own inflation target and has not met it for years."

South Korea's annual consumer price inflation rate fell to zero in August, the slowest on record and bringing the average for this year's first eight months at 0.5%, far below the central bank's 2.0% target.

Roache said the Bank of Korea should focus on boosting inflation, instead of placing a priority on containing housing prices. He said S&P now expects the central bank, which cut interest rates in July, to make two more rate cuts by early next year.

He dismissed an argument that the central bank should save ammunition for the next crisis, saying: "That doesn't make any sense. The best way to save the ammunition is to get inflation up. And the best way to get inflation up is to cut today."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.