Fitch Ratings Reaffirmed Korea's Sovereign Rating at AA- with a Stable Outlook
Fitch Ratings Reaffirmed Korea's Sovereign Rating at AA- with a Stable Outlook

Fitch Ratings Reaffirmed Korea's Sovereign Rating at AA- with a Stable Outlook

  • Sovereign Rating at AA- #1
    Sovereign Rating at AA- #1

    Sovereign Rating at AA- #1

    Fitch Ratings Reaffirmed Korea's Sovereign Rating at AA- with a Stable Outlook

    Three major credit rating agencies kept Korea's rating at its highest level

    *Moody's (Aa2 with stable outlook), S&P (AA with stable outlook)

  • Sovereign Rating at AA- #2
    Sovereign Rating at AA- #2

    Sovereign Rating at AA- #2

    Fitch Ratings maintained Korea's sovereign rating and economic forecast reflecting Korea's strong external finances, resilient recovery, modest headroom against geopolitical risks and structural challenges from an ageing population

    Sinc the outbreak of COVID-19, many advanced economies' sovereign ratings and economic outlook have been downgraded while Korea maintained its rating at the highest level

  • Sovereign Rating at AA- #3
    Sovereign Rating at AA- #3

    Sovereign Rating at AA- #3

    Economic growth

    • Korea's real GDP is projected to grow by 4.5% in 2021 and 3.0% in 2022 due to boost in exports and investment
    • Vaccine rollout and recently proposed 2nd supplementary budget are expected to facilitate sustained recovery in domestic consumption through the 2nd half of 2021
    • Economic scarring from COVID-19 should be limited in Korea, but mid term growth pressures from its rapidly ageing population might serve as a limitation

    Finances

    • Supplementary budget is to be offset by extra tax revenue and sontains no new debt financing
    • Fiscal prudence mitigates some pressures associated with the rise in debt, and a proposed fiscal rule could strengthen fiscal management
    • However, higher debt burden poses some risks to public finances and evolution of these risks will depend on how productivity and potential respond to the government's higher spending

    Risks

    • Low interest rates, along with tight supply conditions, are contributing to a rise in house prices and further rise in household debt, but the risks are comparatively well contained
    • Diplomatic engagements with North Korea remain stalled, although tensions appear relatively stable
    • Solid external finances, underpinned by a large net external creditor position, and high foreign exchange reserves have remained intact through the COVID-19 pandemic