The country's credit rating has been maintained despite the increased stability, but the growth rate forecast for this year has been revised downward to 1.7%.
The decision to maintain the ratings was made based on a comprehensive assessment of the country's financial health, stable macroeconomic performance and dynamism of the export sector, as well as geopolitical risks and structural issues caused by an aging population.
Fitch noted that the political instability caused by the declaration of martial law and the impeachment affair will continue for the next few months. However, it assessed that there will be no substantial impact on the Korean economy and national system.
However, he also pointed out that if this political deadlock continues for a long period of time, it could lead to a deterioration in the efficiency of policy-making, economic performance, and fiscal soundness.
The South Korean economy is expected to grow at 1.7% this year. This is 0% lower than the 2.0% growth forecast for South Korea announced in December 2024.
The reason for this is the weakening sentiment due to political instability and concerns about a slowdown in exports due to the imposition of universal tariffs by the new US administration. However, from next year, consumption, capital investment, and construction investment will likely increase.
Growth is expected to recover to 2.1%, driven by improved investment in new construction. The fiscal sector expects the fiscal balance to improve this year compared to 2024. However, the political situation this year is likely to be a factor.
The report added that the situation is increasing uncertainty about future fiscal prospects and that if government debt continues to increase due to spending on measures to combat the aging population, there are concerns that the government's credit rating could be downgraded.
This year, South Korea's current account surplus is expected to remain high (4.5% of GDP). In addition, the won has been weak due to the recent rise in the dollar, but the South Korean government's strong policy
The Ministry of Strategy and Finance said, "Fitch's decision reaffirms its unwavering confidence in the Korean economy."
"The announcement of these results amid growing political uncertainty since December of last year is expected to alleviate a significant portion of the concerns of foreign investors about Korea's international credibility," he said.
Meanwhile, the South Korean government is increasing contact with global rating agencies to control its external credibility. From the 11th to the 14th, Choi Jeong, Ambassador for International Financial Cooperation, held talks with Hong Kong and
He is scheduled to visit Singapore and meet with Korean rating officials from global credit rating agencies such as Fitch, Moody's and S&P.
2025/02/07 07:07 KST
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