SEOUL, Sept 24 (Reuters) - The United States’ latest tariff on Chinese imports could weigh havily on South Korea’s growth, though its expansionary fiscal and monetary policy would provide some buffer for the economy, Fitch Ratings said on Tuesday.
The latest tariffs would take about 0.5% point off of Korea’s growth rate absent a policy response, Fitch Asia-Pacific sovereign ratings associate director Jeremy Zook said on Tuesday in a media briefing in Seoul, adding that the escalating tariff war has been fully reflected in the country’s downgraded forecast for 2020.
In August, Fitch trimmed next year’s growth forecast for South Korea to 2.3% in August from the previous 2.6%. It currently sees this year’s growth forecast at 2.0%.
Along with the U.S.-China trade war, Fitch also sees trade tensions with Japan as another biggest risk to South Korea’s trade-reliant economy.
Fitch expects the Bank of Korea to cut interest rates another 25 basis points by the end of this year. It said South Korea has more space in both fiscal and monetary policy that would “mitigate the negative impacts” from trade tensions and limit risks to the growth forecast. (Reporting by Joori Roh; Editing by Kim Coghill)