According to Pulse by Maeil Business News Korea,

Standard & Poor`s Global Ratings (S&P) has upgraded its 2021 growth outlook for the South Korean economy to 4.0 percent in just three after its latest projection, citing the country’s strong exports, with expectation for multiple hikes in the country’s policy rate to 1.25 percent until early next year.

The global credit rating company on Wednesday revised upward Asia’s fourth largest economy’s economic growth for 2021 to 4.0 percent from its previous projection of 3.6 percent made in April.

The company’s chief Asia-Pacific economist, Shaun Roache, said during an online press conference on Wednesday, that S&P has been optimistic about South Korea’s economic recovery due to robust exports.

But it forecast the country’s economy to grow 2.8 percent in 2022, lower than the previous projection of 3.1 percent due to the slow recovery in private consumption.

The economist, however, expected that the Bank of Korea would raise its key interest rate late this year or early next year, but the policy rate would not go above 1.25 percent. The central bank froze the base rate at a record low of 0.5 percent in May.

He added inflationary pressure seems to be mostly transitory in Korea and other Asian countries and will disappear next year because household and service sector spending remains weak, and the labor market is tight.

The average inflation rate for this year is expected to remain under 2 percent this year, and the figure will be 1.5 percent next year, according to S&P. The forecast is within the central bank’s target ranges.

When it comes to credit ratings of Korean businesses, S&P director Park Jun-hong said Korean companies` average credit ratings have been improved due to increased profitability driven by strong demand for semiconductors and other key export items despite the impact from the pandemic.

According to S&P ratings this year, the number of Korean companies with negative ratings fell to 25 percent from last year`s 35 percent, while those with positive ratings rose to 8 percent from last year`s 5 percent.



By Pulse

Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.