Amid Small Business Owners' Cries... Blue House Excited by Overseas Reports "Rediscovering Korea"

Credit Rating Agency Fitch Maintains South Korea's Credit Rating
Blue House "Reaffirms South Korea's External Credibility," Encouraged
"Big Hit Entertainment, Kakao Games Also Hit Big"
"Difference Between Most Stock Markets and Korean Market"

The Blue House expressed an encouraging response on the 7th regarding the announcement by international credit rating agency Fitch to maintain South Korea's sovereign credit rating and outlook at the current level (AA-, stable), stating that it is significant in reaffirming South Korea's external creditworthiness.

Amid the worsening hardships faced by self-employed individuals, small and medium-sized enterprises, and small business owners due to the COVID-19 pandemic, the Blue House compared economic indicators among major countries worldwide and self-assessed that they have "rediscovered South Korea."

Lee Ho-seung, the Blue House Chief Economic Secretary, said at a briefing on sovereign credit ratings held at the press center that "Fitch's decision to maintain the sovereign credit rating and outlook this time came amid the global economic recession caused by COVID-19, during which the largest number of sovereign credit ratings and outlooks have been downgraded."

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

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 pandemic, international credit rating agencies are downgrading sovereign credit ratings and outlooks. Moody's, Standard & Poor's (S&P), and Fitch have downgraded sovereign credit ratings or outlooks in 211 cases across 107 countries 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.

Lee emphasized, "We must consider the COVID-19 crisis situation, and despite that, South Korea's sovereign credit rating is maintaining the highest level ever."

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

Lee said, "Even when calculating the growth rate for this year and the combined growth rate for this year and next year, South Korea will show the highest growth rate among the Organization for Economic Cooperation and Development (OECD) countries," specifically referring to Fitch's report and stating, "We have rediscovered South Korea."

Regarding the spectacular initial public offerings (IPOs) of domestic companies such as Big Hit Entertainment, Kakao Games, and SK Biopharm, he also evaluated this as demonstrating the strength of the Korean stock market.

He mentioned the three companies by name and said, "From the perspective of where in the world there is an economy or industrial structure that can create such large companies worth 5 trillion, 6 trillion, and 4 trillion won through initial listings," adding, "I think this is symbolic of the difference between most global stock markets and the Korean market."

However, Fitch pointed out that South Korea's fiscal deficit is increasing due to responses to the COVID-19 pandemic. It warned that high debt levels could pose fiscal risks amid growing expenditure pressures from an aging population. While household debt repayment capacity and bank soundness are currently good, vulnerability is increasing due to the growth in household debt size.

President Moon Jae-in is having a phone conversation with Shavkat Mirziyoyev, President of Uzbekistan, at the Yeoumin Hall of the Blue House on the 6th.

Furthermore, Fitch also evaluated that inter-Korean relations could affect the sovereign credit rating. Fitch assessed that South Korea's diplomatic efforts have stagnated over the past six months and that the outlook for improving inter-Korean relations has worsened, explaining that geopolitical risks related to North Korea are constraining the credit rating.

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

Meanwhile, the number of self-employed individuals who received employment insurance benefits after closing their businesses from January to July this year was higher than the total for the past three years. According to the 'Recent 3-Year Employment Insurance Enrollment and Benefit Status of Self-Employed' disclosed by Jeong Il-young, a member of the Democratic Party of Korea, on the 7th, the number of self-employed individuals who received employment insurance benefits after closing their businesses during this period was 4,277, which exceeded the total of 3,404 for the three years from 2017 to last year.

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