S&P Maintains South Korea's Sovereign Credit Rating at 'AA' with 'Stable' Outlook

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On April 29, global credit rating agency Standard & Poor's (S&P) maintained South Korea's sovereign credit rating at 'AA' with a 'stable' outlook, the same as before. In S&P's system, AA is the third-highest rating, following AAA and AA+.

According to the Ministry of Economy and Finance, S&P stated that while instability in the global energy market due to the Middle East conflict poses a risk to the Korean economy this year, the competitiveness of industrial sectors such as semiconductors and fiscal policy are expected to mitigate these burdens.

S&P forecast that the Korean economy will maintain a higher average growth rate over the next three to four years than most high-income countries. The agency noted Korea's leading position in IT sectors such as semiconductors, as well as its strong competitiveness in shipbuilding, and projected that, by 2029, Korea's per capita GDP would grow at an average annual rate of approximately 2.1%, surpassing $44,000 per person in 2029.

Regarding recent instability in the global energy market, S&P assessed that, although Korea is a major importer of crude oil and natural gas products, it has the capacity to cushion energy supply shocks through diversification of supply sources and the possession of stable oil reserves.

S&P estimated that the risk of contingent liabilities among domestic financial institutions is limited, but noted that the debt of non-financial public enterprises is about 20% of GDP. The agency warned that, if instability in the global energy market continues for an extended period due to the Middle East conflict, major energy public enterprises could face financial difficulties.

Thanks to the recent boom in semiconductor exports, Korea's current account surplus reached 6.6% last year, and S&P expects the surplus to remain above 6% of GDP over the next three to four years. These factors are projected to underpin a gradual strengthening of the Korean won in the coming years.

The Ministry of Economy and Finance commented, "Following Fitch and Moody's earlier this year, all three major international credit rating agencies have consecutively maintained Korea's sovereign credit rating and outlook as stable. Despite the high level of internal and external uncertainty, such as the situation in the Middle East, positive assessments of the Korean economy from overseas remain robust."

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