S&P Points Out 'South Korea's Fiscal Capacity Amid Aging Population'... Hong Nam-ki Says "Fiscal Rules Must Be Legislated"

S&P Maintains South Korea's Credit Rating at 'AA' Since 2016... Expected to Announce in First Half of Next Year

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance (left), is greeting Ipan Pua, Director of Sovereign Ratings for the Asia-Pacific region at S&P Global Ratings (right), and Kim Eng Tan, Senior Director of Sovereign Ratings for the Asia-Pacific region, at the Seoul Government Complex in Gwanghwamun, Seoul on the 30th. 2021.11.30 [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Son Sun-hee] International credit rating agency Standard & Poor's (S&P) mentioned "fiscal capacity to prepare for aging and unification costs" as a long-term risk to the Korean economy on the 30th. In response, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, expressed his determination to ensure that the fiscal rules legislation currently under discussion in the National Assembly is enacted, the Ministry of Economy and Finance reported.

According to the Ministry of Economy and Finance, Deputy Prime Minister Hong held a meeting with the S&P annual consultation team, including Kim Eng Tan, Senior Director in charge of sovereign credit ratings for the Asia-Pacific region, and Ipan Pua, Director in charge of sovereign credit ratings for the Asia-Pacific region, who are visiting Korea, and discussed these matters.

S&P evaluated that "Korea's credit conditions are very strong, and it has achieved better performance compared to other countries with similar ratings in terms of economic recovery and fiscal soundness after the pandemic."

However, the Ministry of Economy and Finance reported that S&P mentioned, "In the short term, we are paying attention to household debt and the real estate market, and in the medium to long term, we are monitoring social disparities and fiscal capacity to prepare for aging and unification costs."

In response, Deputy Prime Minister Hong explained, "We plan to strengthen total volume management by controlling the increase rate of (debt) to around 4-5% next year through enhanced household debt management measures, and also strengthen support such as expanding supply of policy finance for low-income groups and refinancing to minimize damage to vulnerable groups and actual demanders."

Regarding the real estate market situation, he stated, "Since the end of September, the upward trend in real estate prices has calmed down and market sentiment has stabilized," adding, "Considering the effects of interest rate hikes and strengthened loan regulations, we expect the stability to continue in the future."

Regarding social disparities mentioned by S&P as a medium to long-term risk, Deputy Prime Minister Hong said, "While the overall employment situation has recovered to pre-crisis levels, youth employment has recorded the highest employment rate since 2004, and both fiscal jobs and private sector jobs are increasing evenly, showing a favorable improvement," and explained, "Income and distribution conditions also greatly improved in the third quarter."

On the medium to long-term fiscal situation, he said, "Although six supplementary budgets were prepared last year and this year, we implemented cost-effective policies that achieved better crisis overcoming effects with relatively small fiscal input compared to major countries by focusing on essential projects," expressing his intention to legislate fiscal rules and stating, "We will continue efforts to stabilize finances through efficient fiscal management in the future."

Meanwhile, S&P is expected to complete its annual consultation schedule with the Financial Services Commission, the Bank of Korea, and others by the 2nd of next month and announce Korea's credit rating in the first half of next year.

S&P has maintained Korea's credit rating at the highest level ever of 'AA, Stable' since upgrading it in August 2016 and has kept it for more than five years until recently.

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