Moody`s Investors Service, the United States-based international credit rating agency, warned South Korea’s potential growth rate could be revised downwards if the government-led reforms are delayed amid weakening domestic consumer sentiment and a slowing Chinese economy.

In a report released on Monday, Moody’s forecast Korea’s real GDP to grow at 2.5 percent this year and 2.9 percent until 2020, but “any delays in implementing structural reforms would weaken Korea’s growth potential further.”

The credit rating agency warned of risks of delays in the government-led restructuring and reform implementation, citing weakening “consumer confidence” following a series of domestic events such as the Sewol ferry accident and the outbreak of Middle East respiratory syndrome (MERS), as well as slowing growth in China.

It also voiced repeated concerns that the defeat of the Saenuri party, the former ruling party that has been supporting the structural reforms, to the opposite party in the country’s 20th parliamentary election would make it hard to carry out the restructuring initiatives. In the general election on Wednesday, the main opposition Minjoo Party of Korea secured 123 seats, Saenuri Party 122 seats, splinter opposition People’s Party 38 seats, leftist Justice Party six and independents 11 seats from the general election to form 20th legislative.

“Saenuri could still achieve the largest number of seats if seven former party members who contested the election as independents return to the party. Nevertheless, it is far less than the three fifths majority that Saenuri was aiming to achieve,” the credit rating agency said in the report.

Moody’s on Thursday after the 20th legislative election said the result from the recent election may produce negative impact on Korea’s credit rating as the major bills for government’s structural reforms would face more obstacles to pass the congress.

By Kim Gyu-sik

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