International credit rating agency Fitch Ratings announced on Feb. 12 that it maintained its credit rating and outlook for South Korea at "AA-" and "Stable." Earlier, the agency adjusted the rating from "A+" to "AA-" in September 2012 and the rating has been maintained since then. At present, South Korea has the same rating as Taiwan, Belgium and Qatar.
The agency said that South Korea’s annual economic growth rate, which was 2 percent last year, is expected to rise to 2.3 percent this year. It is the same estimate as in August 2019. The agency mentioned fiscal expansion, a recovery in semiconductor price and reduced trade policy-related uncertainties in maintaining the estimate.
The agency also said that Covid-19 is likely to affect South Korea’s tourism industry and retail sales to have an adverse impact on the supply side and South Korea’s international trade may be affected with China increasing its imports from the United States.
In addition, it pointed out that debts in the public sector of South Korea are on the increase to pose potential problems. According to the agency, South Korea’s overall fiscal deficit is predicted to reach 1.5 percent of its GDP and the deficit in its social security fund-excluded fiscal balance is estimated at 3.5 percent of its GDP. “South Korea’s credit rating may be lowered in the mid-term if its debt-to-GDP ratio reaches 46 percent in or before 2023,” it explained.
Fitch Ratings predicted that the Bank of Korea would lower the key rate by 0.25 percentage point this year and an inflation rate as low as 0.5 percent or so would continue in the country this year. “Although South Korean households’ debts amount to 96.6 percent of the country’s GDP, the debts are increasing at a slower pace these days,” it mentioned.