Fitch Maintains South Korea's Sovereign Credit Rating at AA- with 'Stable' Outlook for 9th Consecutive Year (Update)

South Korea's Growth Rate Forecasted at 4.5% This Year

[Asia Economy Reporter Jang Sehee] The international credit rating agency Fitch announced that it will maintain South Korea's sovereign credit rating and outlook at the current level of AA- with a stable outlook. South Korea has maintained this rating since it was upgraded from A+ to AA- in September 2012, nine years ago.

On the 22nd, Fitch stated that it will keep South Korea's sovereign credit rating and outlook at the current level (AA-·stable).

Fitch forecasted South Korea's growth rate this year at 4.5%, saying, "The growth momentum is expected to continue for the time being due to strong exports and investment," and added, "Although social distancing measures were strengthened due to the increase in COVID-19 cases, consumption recovery is expected to continue in the second half of the year thanks to accelerated vaccine distribution and the second supplementary budget (추경)."

However, Fitch assessed that rapid aging will constrain medium-term growth rates.

Fitch also evaluated the Korean New Deal. It said, "The Korean government is promoting large-scale fiscal support such as the Korean New Deal to enhance productivity," and added, "The effects will likely be assessable after some more time has passed."

Concerns about the increase in national debt were also mentioned. Despite the second supplementary budget, the fiscal outlook is expected to improve compared to the initial forecast, but it is anticipated to act as a risk factor in fiscal management. Furthermore, Fitch projected that as some government bonds are repaid in the future, the medium- to short-term fiscal indicator will record 47.1%, 0.7 percentage points lower than the previous forecast of 47.8%.

Additionally, although real estate prices continue to rise and household debt is increasing, Fitch evaluated that the risks arising from these are relatively well controlled through policy responses.

Meanwhile, the Ministry of Economy and Finance issued a press release regarding Fitch's decision to maintain the sovereign credit rating, stating, "Considering that Fitch downgraded the ratings or outlooks of 18 advanced countries after COVID-19 and that most of the downgraded ratings and outlooks have not yet recovered, this result is a meaningful achievement." It emphasized, "We will actively promote the legislation of fiscal rules and establish the 2021-2025 national fiscal management plan reflecting proactive fiscal volume management efforts."

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