Sam­sung woes shadow South Korea growth fore­cast

The Sun (Malaysia) - - SUNBIZ -

SEOUL: South Korea’s cen­tral bank yes­ter­day trimmed its 2017 growth out­look, hav­ing con­sid­ered the po­ten­tial im­pact of Sam­sung’s Note 7 re­call cri­sis on the na­tional econ­omy.

The elec­tron­ics gi­ant an­nounced on Tues­day it was scrap­ping pro­duc­tion of the new smart­phone, fol­low­ing re­ports that re­place­ments for com­bustible mod­els were also catch­ing fire.

The move sent Sam­sung’s share price into a steep dive and forced it to slash its third quar­ter profit es­ti­mate by a third.

With Sam­sung ac­count­ing for around 17% of South Korea’s gross do­mes­tic prod­uct, such a ma­jor busi­ness re­ver­sal is likely to have a na­tional im­pact, Bank of Korea Gov­er­nor Lee Ju-Yeol said.

“Be­cause it makes up such a large por­tion of our econ­omy, we con­sid­ered the im­pact from the dis­rup­tions in its pro­duc­tion in our fore­cast,” Lee told re­porters fol­low­ing a monthly mon­e­tary pol­icy meet­ing.

The meet­ing re­vised its 2017 growth es­ti­mate down to 2.8% from 2.9%.

The down­grade comes as ex­perts warn of hur­dles for the econ­omy in­clud­ing an ex­pected US in­ter­est rate rise, re­struc­tur­ing by South Korean firms and an anti-graft law that some warn will hurt re­tail­ers and food pro­duc­ers.

Judg­ing the un­cer­tain­ties fac­ing the coun­try’s growth path to be “high”, the bank also held its key in­ter­est rate at a record-low 1.25% for the fourth con­sec­u­tive month, while weigh­ing the fi­nan­cial risks of mount­ing house­hold debt.

House­hold debt rose to a record US$1.1 tril­lion (RM4.64 tril­lion) as of the end of June – an 11% jump from the same pe­riod last year, fu­elled by eased mort­gage rules and the low in­ter­est rate.

Krys­tal Tan, an an­a­lyst at Sin­ga­pore­based Cap­i­tal Eco­nom­ics, said the debt con­cerns would “likely de­ter the cen­tral bank from cut­ting rates fur­ther”. – AFP

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