Korea’s economic growth rate could drop to the 1-percent range this year if worsening external market conditions make a dent in its exports, a report indicated Thursday.

Bank of America Merrill Lynch forecast that Asia’s fourth-largest economy could expand 1.8 percent this year, according to the report compiled by the Korea Center for International Finance.

This is much lower than the government’s estimate of 3.3 percent and the Bank of Korea’s 3 percent growth projections. The government and the BOK both recently revised down their growth outlooks from 3.7 percent and 3.5 percent, respectively.

The investment bank still calculates South Korea could achieve around 3-percent growth through stimulus measures but also believes things could turn bad fast for its export-driven economy should external market conditions deteriorate further, the report showed.

BOA Merrill Lynch cited the slowing growth in China as a major drag on South Korea. China’s gross domestic product grew 7.6 percent in the second quarter from a year earlier, the first time the rate has fallen below 8 percent in three years.

The prolonged eurozone debt problems and a slowdown in the U.S. were also cited as other possible downside risks for the Korean economy, according to the report. (Yonhap News)