Fitch Ratings lowered the growth forecast for South Korea this year by 0.2 percentage point due to the fallout of the coronavirus outbreak, the credit appraiser said Tuesday.

The downgrade, would mean Asia's fourth largest economy will backtrack 1.1 percent this year from 2019. Fitch earlier predicted Seoul's economy to post negative growth of 0.9 percent. This is slightly better than the 1.3 percent contraction announced by the Bank of Korea last month.

Fitch predicted that while the impact of the pandemic is less severe in South Korea than in most other countries, areas such as consumption have taken a hit and will continue to struggle in the third quarter in the face of social distancing rules.

Fitch said that while the country's gross domestic product contracted 3.2 percent in the April-June period, which is worse than the 1.3 percent drop tallied for the first three months of 2020, the poor showing has mainly been caused by external developments like the economic problems facing many of South Korea's key trading partners.

It then said that while BOK is targeting consumer price growth of some 2 percent this year, this may not be realized. Fitch said that under such circumstances, the country's central bank will have to continue with its current monetary easing policy, and could even lower key rates 0.25 percentage point within the year, and start a limited asset buying program.

The country's key rate currently stands at a record low 0.5 percent.

On the country's handling of COVID-19, Fitch said that even with the recent rise in confirmed cases, the national quarantine effort has been successful, allowing the government not to enforce strict isolation measures.

It then predicted that South Korea's economy should steadily make a recovery in the second half. (Yonhap)