Global rating agency Moody's Investors Service on Tuesday sharply lowered its growth outlook on the South Korean economy for this year, citing the fallout from the slowing Chinese economy.

In a report, the rating agency expected Asia's fourth-largest economy to grow 2.5 percent this year, sharply lower than its earlier estimate of a 3.1-percent expansion. Moody's also cut its 2016 projection on the economy to 2.5 percent from its previous 3.4 percent on-year gain.  

The downward revision comes as the trade-reliant Korean economy is struggling from sagging exports. In August, exports plummeted 14.7 percent, falling at the fastest clip in six years.

Trade prospects also remain murky in tandem with growth uncertainties in China, the country's biggest trading partner.

"In Japan and Korea, China's slowdown will dampen exports of manufactured goods, and weigh on corporate and consumers' willingness and ability to spend, hampering domestic demand," Moody's said in a report.

It left its 2015 forecast for the Chinese economy unchanged at 6.8 percent, but cut its forecast for next year to 6.3 percent from 6.5 percent.

Adding on to concerns over the Korean economy, uncertainties over the timing of the first U.S. rate hike in a decade has even spurred worries over a sharp outflow of foreign capital.

The Korean government, however, stands firm on its growth estimate of 3.1 percent.

In an interview with the Wall Street Journal earlier this month, the country's top economic policymaker Choi Kyung-hwan said that the estimate is feasible if stimulus measures and structural reform efforts are successful. (Yonhap)