The historic downgrade of the U.S. credit rating late Friday and subsequent mass sell-off in equity markets around the world have threatened to hamper Korea’s economic growth, leaving few options for the central bank in its scheduled policy-setting meeting this week.

Standard & Poor’s downgraded the U.S. credit rating from “AAA” by a notch to “AA+” in a move that alarmed investors across the globe, resulting in skidding indexes across the board. The latest shock came as investors are increasingly concerned by the debt crisis that dogs both the U.S. and the eurozone.

The Bank of Korea said in a report on Tuesday that the crisis facing the U.S. economy, a key export market for Korea, has added to uncertainty in the global financial market, but its impact on the Korean economy might be limited.

“The downgrade of the U.S. credit rating could lead to hurt consumer sentiment and weaken the global economic growth, but Korea is relatively safe from the fallout,” the central bank said.

The BOK estimated that a 1 percentage point drop in U.S. economic growth could drag down the Korean economy by 0.4 percentage point. The U.S. economy grew just 0.8 percent in the past six months, and the outlook remains grim as the debt deal struck in Washington is feared to kill off the fragile economic recovery in the U.S., a dire scenario that sees a recession looming large.

Export-dependent Korea cannot protect itself from external shocks from its trading partners like the U.S. and eurozone nations, but the BOK said the proportion of export volume to the U.S. market accounts for about 10 percent in the country’s total outbound shipment, while more than 70 percent of exports go to emerging markets.

The central bank, however, cautioned that fluctuation in the stock and foreign exchange markets could undermine consumer spending and crimp investment.

But the economic outlook for Korea was under pressure before the U.S. credit downgrade last week. In mid-July, the BOK revised down its gross domestic product forecast for 2011 from 4.5 percent to 4.3 percent, reflecting growing uncertainties in the market.

Deteriorating external factors are also expected to force the BOK to freeze the key interest rate in its policy-setting meeting slated for Thursday. The central bank kept the rate unchanged at 3.25 percent last month despite the stronger inflationary pressure.

“Considering the heightened risk factors overseas, the Bank of Korea is expected to take a wait-and-see stance in its rate-setting meeting on Thursday,” said NH Investment Securities in a report on Tuesday.

Korea’s consumer prices rose 4.7 percent last month from the year-earlier period, extending an upward trend from a 4.4 percent rise the previous month.

By Yang Sung-jin (insight@heraldcorp.com)