Synopsis
Fitch Ratings has confirmed South Korea's sovereign rating at 'AA-' with a stable outlook, maintaining this level since 2012. Despite political unrest, the agency highlights stable economic fundamentals and a modest growth forecast of 1.7% for the year.Key Takeaways
- Fitch maintains South Korea's rating at 'AA-'.
- Stable outlook persists amid political unrest.
- Economic growth forecast adjusted to 1.7%.
- Household debt remains high but borrowing has stabilized.
- Government initiatives aim to boost fiscal spending.
Seoul, Feb 6 (NationPress) The global credit rating agency Fitch Ratings announced on Thursday that it has confirmed South Korea's sovereign rating at "AA-" with a stable outlook.
This rating holds the position of the fourth-highest tier on the agency's sovereign ratings scale, and Fitch has sustained the AA- rating for South Korea since September 2012, when it was elevated by one notch from A+.
The recent decision occurs in spite of worries regarding political turbulence following President Yoon Suk Yeol's brief imposition of martial law on December 3 and his subsequent impeachment, as reported by Yonhap news agency.
According to the agency's latest report, "(South) Korea is currently experiencing a political crisis that we believe will be resolved in a constitutional manner, which does not fundamentally change our evaluation of institutions or governance."
Fitch indicated that it will keep a close watch on the risks associated with potential political instability as uncertainty lingers.
Furthermore, the agency noted that South Korea's economic fundamentals remain robust, with its credit rating indicating strong external finances, consistent macroeconomic performance, and a vibrant export sector.
Fitch has adjusted its growth forecast for South Korea's economy to 1.7 percent for this year, a decrease from the earlier estimate of 2 percent, citing the adverse effects of political uncertainty on business confidence.
This latest projection is slightly more optimistic than the 1.6 percent growth forecast provided by the Bank of Korea, which highlighted concerns regarding the ongoing political turmoil.
Fitch remarked, "Exports are expected to moderate, partly due to our anticipation of a 10 percent global tariff by the new U.S. administration, and downside risks remain elevated considering the uncertainty surrounding U.S. tariffs."
In January, South Korea's exports, a crucial driver of economic growth, experienced a decline for the first time in 16 months, according to government statistics.
On a brighter note, Fitch commended the Seoul government's initiative to front-load 75 percent of fiscal spending for 2025 during the first half of the year.
The agency also observed that household debt is relatively high compared to other advanced economies.
However, it noted a slight increase in borrowing in recent quarters as interest rates have decreased and apartment prices have stabilized.
Fitch further added that the nation's solid external finances continue to benefit from ongoing current account surpluses.
The South Korean government remarked that Fitch's latest rating announcement reinforces unwavering confidence in the nation's economy.
The finance ministry stated, "This is expected to mitigate a substantial portion of foreign investors' concerns regarding South Korea's external credibility."
