By Yoon Sojung and Lee Hana
Despite Japan's economic sanctions on Korea in recent months, global credit appraiser Fitch on Aug. 8 reaffirmed its stable outlook for Korea with an "AA-" rating.
"Even with geopolitical risks related to North Korea and structural challenges, Korea balances robust external finances, sound fiscal management and steady macroeconomic performance," Fitch said in a report posted on its website. "Korea's economic momentum has slowed considerably over the past year due to U.S.-China trade tensions but nevertheless, underlying growth performance remains sound and broadly in line with peers."
The agency forecast that Korea's economic growth will slow to 2% this year from 2.7% last year, noting that "the downturn in the semiconductor sector is driving a contraction in exports and weighing on facilities investment."
On Korea's removal from a Japanese whitelist of trusted export partners, Fitch said "these actions are likely to disrupt supply chains and create uncertainty for Korean firms' ability to import inputs from Japan."
Turning to the situation on the Korean Peninsula, the agency said geopolitical risk weighs on Korea's rating. Noting that progress on denuclearization negotiations had stalled since the summit in late February this year between the U.S. and North Korea in Hanoi, Vietnam, it said the two Koreas had "made strides to improve cultural linkages despite the stalled denuclearization talks."
Standards & Poor’s keeps Korea’s credit rating at AA on Aug 18. (Yonhap News)
By Kim Tae Won and Sohn JiAe
Standards & Poor’s announced on Aug. 18 that it would leave Korea’s credit rating unchanged at AA with the nation's economic outlook remaining stable.
The international credit-rating service has maintained an AA credit rating, its third-highest grade, on Korea since August 2016.
“Although geopolitical tensions have risen of late on the Korean Peninsula, we believe a direct armed conflict is unlikely,” the agency said. “The stable outlook for Korea reflects our expectation that geopolitical risks on the peninsula will not escalate over the next two years.”
As for economic conditions in Korea, S&P said that, “Korea’s economic performance has been stronger than that of most other high-income economies in recent years. The Korean economy remains well-diversified and is not dependent on a particular industry or export market.”
The rating company projected that Korea’s average GDP per capita will rise to above USD 33,000 in 2020, from approximately USD 29,000 this year. It also estimated that the trend rate of the nation’s real per capita GDP growth would be 2.3 percent higher than the typical 0.3 to 1.5 percent range observed in most high-income countries. Korea’s current account surplus would widen to a record 8.5 percent of GDP this year, and overall economic growth would hit 2.8 percent, it projected.