South Korea's economic growth is still expected to meet the government's expectations this year, according to the deputy finance minister, but recent strikes at Hyundai Motor Co and the discontinuation of Samsung Electronics Co Ltd's Note 7 sales pose risks. Ciara Lee reports.
Reuters) - While growth is expected to meet expectations this year, the government says the scrapping of the fire-prone Note 7 will have a negative impact going forward.
Samsung is bracing for a three billion dollar hit over the next two quarters.
The total loss for the global smartphone leader is expected to be over 5 billion dollars as a result of the overheating issues.
The device that was meant to compete with Apple's latest iPhones was withdrawn from sale less than two months after its launch.
Several airlines have now decided to ban it from flights.
CHIEF ECONOMIST AT WORLD FIRST, JEREMY COOK,
"Samsung is a global light for South Korea. If you think of South Korea you think of Samsung. You have to take a case in point for example like Volkswagen in Germany. The huge damage that's done to the company and will likely have done to the local economy. Obviously the German and South Korean economies are vastly different but if the Volkswagen problems hurt the German economy, you would have to expect the Samsung ones to hurt the South Koreans."
And it's not just Samsung causing concern.
The government has warned that strikes at carmaker Hyundai could also hamper growth.
A tentative wage pact with the South Korean union has now been reached.
But the worst strikes in the company's history coupled with sluggish domestic demand have prompted analysts to slash earnings forecasts.
South Korean factory output in August fell 2.4 percent from July, the fastest decline in 19 months.Reuters
Ringing in tougher times - the impact of South Korea's Samsung saga is beginning to be felt.