Seoul: Global credit appraiser Fitch Ratings announced on Thursday that it has reaffirmed South Korea's sovereign rating at "AA-" with a stable outlook. This decision marks the continuation of the rating level that Fitch has maintained for South Korea since September 2012, following an upgrade from A+.
According to Yonhap News Agency, the reaffirmation comes despite the political unrest triggered by President Yoon Suk Yeol's brief imposition of martial law on December 3, which subsequently led to his impeachment. Fitch expressed confidence that the political crisis in South Korea would be resolved constitutionally, without fundamentally impacting the country's institutional or governance assessment.
Fitch highlighted that South Korea's economic fundamentals remain robust, with strong external finances, steady macroeconomic performance, and a dynamic export sector supporting the current credit rating. However, the agency revised its growth forecast for South Korea's economy to 1.7 percent for the year, down from a previous projection of 2 percent, attributing the adjustment to the political uncertainty affecting business confidence.
The report noted that South Korea's exports, a critical driver of economic growth, experienced a decline in January for the first time in 16 months. This downturn coincides with expectations of a 10 percent global tariff imposed by the new U.S administration, which adds to the downside risks due to the uncertainty surrounding U.S. tariffs.
On the fiscal front, Fitch acknowledged the Seoul government's strategy to front-load 75 percent of its fiscal spending for 2025 in the first half of the year as a positive development. Additionally, the agency addressed concerns over high household debt levels compared to other advanced economies, though noted a slight increase in borrowing as interest rates eased and apartment prices stabilized.
Fitch further emphasized South Korea's strong external finances, which continue to benefit from persistent current account surpluses. The South Korean government welcomed Fitch's rating announcement, interpreting it as a reaffirmation of the global confidence in the country's economic stability. The finance ministry expressed optimism that this would alleviate foreign investors' concerns regarding South Korea's external credibility.