The South Korean government has been adhering to the stance that Asia's fourth-largest economy will gather pace during the second half of the year on the back of an improvement in prices of chips, a major export item for the country, and expanded fiscal spending.
|This photo shows containers carrying export goods stacked on piers in South Korea's largest port city of Busan. (Yonhap)|
But a decline in chip prices is not showing signs of a let-up, and the American-Sino trade war is forecast to last longer than expected, they said.
The finance ministry has been expecting the economy to grow between 2.5 percent and 2.6 percent this year, and it would cut the range by 0.1 percent point or more, they said.
Most think tanks and global institutes have already sharply trimmed their outlook for the economy.
The Bank of Korea slashed its estimate to 2.5 percent from 2.6 percent. The state-run Korea Development Institute put its estimate at 2.4 percent.
Foreign investment banks put out an average estimate of 2.3 percent growth for the South Korean economy, with Nomura being the most pessimistic with 1.8 percent expansion.
Seoul's exports have been on the decline since December amid the escalating trade tensions between the world's two largest economies. Shipments to China, the world's single largest importer of South Korean products, have also been on the wane since November.
Exports of semiconductors, the bellwether for the country's exports, continued to decline last month.
Outbound shipments of chips reached $7.53 billion in May, falling a whopping 30 percent from a year earlier, and shipments of petrochemical products also nose-dived 16.2 percent over the period to $3.66 billion on weaker demand from China, government data showed.
South Korea's exports fell 10 percent in the first 20 days of June from a year earlier on weaker global demand for semiconductors, heralding that this month's outbound shipments would not be good as well.
The economy unexpectedly contracted 0.3 percent in the first quarter of the year from three months earlier, marking the worst performance in a decade, due to a sharper-than-expected dip in exports and facility investment. (Yonhap)