Fitch’s Sovereign Credit Rating for Korea

Fitch Maintains Korea’s Sovereign Rating at AA-

Fitch reaffirmed Korea’s sovereign rating at AA- with a stable outlook. Fitch stated that Korea’s rating balances robust external finances, resilient macroeconomic performance and dynamic export sector against geopolitical risks related to North Korea, and structural challenges from an ageing population. It also assessed that the country has sufficient fiscal space to accommodate rising government debt to GDP in the near term.

Fitch projected Korea’s GDP growth to slow to 2.6% in 2022 and 1.9% in 2023 and its CPI inflation eased in August and is expected to further decline to 1.5% by end-2023. It also mentioned that Korea’s external finance position provides a sufficient buffer to manage the current bout of external volatility. Fitch views household debt as a potential vulnerability amid rising rates and slowing growth, but it could be manageable. Regarding North Korea risk, the rating agency projected that there will be little progress for inter-Korean relations in the near term.     

Korea’s future response

Fitch’s sovereign credit rating on Korea at AA- reaffirms that it still positively assesses the Korean economy despite growing external uncertainties. As the rating agency pointed out that Korea’s fiscal soundness is projected to improve and external soundness is robust compared to other countries, its assessments on these two factors have been improved. The government will work to strengthen communications with global credit rating agencies such as Fitch to enhance the county’s creditworthiness and actively address some concerns about fiscal burdens caused by an ageing society and household debts by attending talks with global rating agencies before and after the G20 Finance Ministers and Central Bank Governors’ Meeting.

More details about the Rating Action are available on the following: https://www.fitchratings.com/research/sovereigns/fitch-affirms-korea-at-aa-outlook-stable-28-09-2022