청 "Maintaining National Credit Rating, Reaffirming Korea's Economic External Credibility" Encouragement

International Credit Rating Agency Fitch Maintains South Korea's Credit Rating
Blue House Self-Assessment: "Result of Global Economic Recession Due to COVID-19"

President Moon Jae-in is presiding over a Cabinet meeting at the Blue House on the morning of the 6th.

The international credit rating agency Fitch announced that it will maintain South Korea's sovereign credit rating and outlook at the current level (AA-, stable). The Blue House praised this on the 7th, saying it "reaffirms South Korea's external creditworthiness."

Lee Ho-seung, the Blue House Chief Economic Secretary, told reporters at the press center on the same day, "Fitch's decision to maintain the sovereign credit rating and outlook amid the global economic recession caused by the novel coronavirus infection (COVID-19), which has led to the largest number of sovereign credit rating and outlook downgrades in history, is significant."

On this day, Fitch announced that while it is downgrading the sovereign credit ratings of major countries one after another, South Korea's credit rating will remain unchanged.

According to Fitch, AA- represents the fourth highest sovereign credit rating. Countries such as the United Kingdom, Hong Kong, Belgium, and Taiwan belong to the AA- group. The highest rating, AAA, includes 10 countries such as Germany, Singapore, and the United States; the next rating, AA+, includes three countries such as Finland; and the following AA rating includes five countries such as France.

Due to the global economic recession caused by the COVID-19 crisis, international credit rating agencies are downgrading sovereign credit ratings and outlooks. Moody's, Standard & Poor's (S&P), and Fitch have downgraded the sovereign credit ratings or outlooks of 107 countries in 211 cases just this year. The United Kingdom and Canada have seen their sovereign credit ratings lowered, and the United States and Japan have recently had their rating outlooks downgraded.

Fitch stated that although the spread of COVID-19 is placing a burden on economic growth and fiscal conditions, it expects South Korea to achieve a better economic growth rate compared to major advanced countries and countries with similar ratings (AA) through effective COVID-19 policy responses.

Fitch explained that this sovereign credit rating evaluation of South Korea reflects sound external soundness, continuous macroeconomic performance, and fiscal capacity under medium-term challenges such as geopolitical risks related to North Korea, aging population, and moderate growth.

Maintaining the credit rating and outlook does not mean there is absolutely no change in circumstances, but considering the current international trend, Lee said, "It is significant in that South Korea's external creditworthiness has been reaffirmed by international organizations."

However, Fitch warned that South Korea's high debt level could pose a fiscal risk and pointed out that geopolitical risks related to North Korea could negatively affect South Korea's credit rating.

Regarding inter-Korean relations, Fitch assessed that diplomatic efforts over the past six months have been at a standstill and the outlook for improving inter-Korean relations has worsened, explaining that geopolitical risks related to North Korea are constraining the credit rating.

Lee said, "If tensions on the Korean Peninsula worsen further, the credit rating could be downgraded," adding, "This explains why North Korean risks must be managed very carefully in relation to the sovereign credit rating."

Additionally, Fitch mentioned the increase in South Korea's fiscal deficit as a response to the COVID-19 crisis. It warned that the high debt level could pose a fiscal risk amid growing expenditure pressures due to aging. While household debt repayment capacity and banking soundness are currently good, it pointed out that vulnerabilities are increasing due to the growth in household debt size.

This content was produced with the assistance of AI translation services.