Maintaining Rating
Fitch has maintained Korea’s credit rating at AA- for the 34th consecutive month, while maintaining a credit outlook of stable. It mentioned that Korea has solid macroeconomic conditions, along with a high level of fiscal soundness.
According to the credit rating agency, Korea’s economic growth is expected to show some recovery from next year. It suggested 2.9 percent for this year, 3.4 percent for 2016, and 3.6 percent for 2017. It added that the Korean government’s revised supplementary budget and expansionary fiscal policy will have a positive effect on consumer sentiment. “Korea’s government debt level is lower than the average of those of AA countries such as Britain, Hong Kong, and France, and the government is striving to reduce public debt while the consolidated central government surplus is going on,” it explained, continuing, “Korea appears to be less vulnerable than most AA countries to external risks such as an interest rate hike in the United States, because it has large amounts of current account surplus, foreign exchange reserves, and international assets.”
Still, it pointed out that the geopolitical risks associated with North Korea and a GDP lower than the average of other AA countries’ could inhibit a rise in credit rating. It also mentioned that the ongoing rapid increase in household liabilities could make things worse in the event of a negative impact on the economy. “We can adjust Korea’s credit rating upward in the future on the condition that public debt is reduced at an accelerated pace and the GDP per capita continues to increase,” it said.