Fitch Maintains South Korea's Credit Rating at AA- with Stable Outlook: "2.1% Growth Expected This Year"

On the 6th, the Ministry of Economy and Finance announced that the international credit rating agency Fitch maintained South Korea's sovereign credit rating and outlook at AA- with a stable outlook.

Fitch forecasted that South Korea's economic growth rate will grow by 2.1% this year, supported by a recovery in exports.

In particular, the semiconductor sector is expected to continue its positive trend through next year due to strong demand related to artificial intelligence (AI).

The fiscal deficit is predicted to decrease compared to last year (△2.0% of GDP) to △1.9%. Thanks to the government's efforts to strengthen fiscal soundness, the fiscal deficit is expected to shrink further next year compared to this year and continue to decline thereafter. Additionally, Fitch mentioned that the legislation of fiscal rules is still under discussion in the National Assembly, and the April general election could impact the momentum of the current government's fiscal policies.

The benchmark interest rate is expected to start decreasing from the second half of this year and fall to 3.0% by the end of the year. The consumer price inflation rate was assessed to be on a downward trend, and South Korea's current account surplus is projected to expand from 2.1% of GDP in 2023 to 2.8% this year. Foreign exchange reserves were evaluated to be at a sufficient level, covering 6.2 months of total current payments.

In the financial sector, Fitch assessed that South Korea's financial stability risks are well managed, and the domestic banks' project financing (PF) loan exposure is at a low level.

The Ministry of Economy and Finance stated, "Through this evaluation, Fitch forecasts an improvement in our economic growth and expects the fiscal deficit to continue decreasing thanks to the government's sound fiscal efforts, while also highly rating our external soundness. The government plans to maintain close communication with international credit rating agencies such as Fitch, reaffirm our consistent sound fiscal stance, and actively explain policy directions to enhance growth potential such as a dynamic economy, thereby making every effort to improve our external credibility."

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