Asian woes may pose risks to Korean economy

China and other Asian economies are saddled with a raft of downside risks, adding to fears they may hurt the South Korean economy along with lingering eurozone debt woes, a report showed Tuesday.

The report by the Korea Center for International Finance said that such risks could further undermine the global economy already buffeted by the impact from the long-standing eurozone debt crisis.

According to the report, China is likely to see its economic growth rate fall by up to 1.5 percentage points this year as declining property prices sap domestic purchasing power.

Provincial governments’ high debts that exceed those of the central government and slowing exports were pointed out as other factors that could deteriorate domestic demand.

The Indian government’s debt against its gross domestic product may rise to 5.5 percent from its goal of 4.6 percent. A weakening Indian rupee may make it more difficult for the emerging economy to repay its foreign debts.

Hong Kong and Singapore, which have stepped up efforts to cool foreign purchases of properties, may see their property markets undergo a correction.

Indonesia, which has far outperformed its Asian peers in terms of its growth rate over the last few years, may see signs of an overheated economy, the report said.

While experts said the impact from the regional woes is likely to be limited compared with the fallout from the eurozone debt crisis, risks still loom.

“Slowing exports in China is one factor that could directly impact Korea, since local firms export a lot of intermediary goods that Chinese firms use to complete products,” said Han Jae-jin, a researcher at the Hyundai Research Institute.

Around 70 percent of the goods South Korea ships to China are assembled there ahead of being exported to Europe and the United States.

Nomura also said in an earlier report that weaker demand for Asia’s products and services in Europe would trigger lackluster Chinese domestic demand and also damage Asia’s exports to China.

Market watchers said investors should keep tabs on how Beijing utilizes its macroeconomic policy to cope with its internal risks and how this would further impact other Asian economies. 

(Yonhap News)