According to Yonhap News,

Global credit appraiser S&P Global Ratings maintained Tuesday its credit rating on South Korea at "AA," with a stable outlook, saying that "active" efforts by policy institutions helped curb political uncertainties arising from the short-lived martial law imposition in December.

S&P has kept South Korea's long-term sovereign credit rating at the third-highest level on the company's table of "AA" since August 2016, when it upgraded the rating by one notch from "AA-."

"The stable rating outlook reflects our expectation that Korea will maintain average growth rates that are higher than most other high-income economies over the next three to five years at least," the company said. "We also anticipate that general government deficits will remain modest in the next three to four years."

The credit appraiser expected trade disruptions to bring real gross domestic product (GDP) growth down to 1.2 percent this year and 2 percent in 2026, with the real per capita GDP growing about 2 percent annually in the 2025-28 period.

South Korea's per capita GDP was forecast to rise to nearly US$41,000 in 2028, from below $35,000 in 2025, it said.

S&P said the country's institutions and policy environment continued to be "key credit supports" despite the unexpected martial law imposition in December.

"We view the swift reversal of the declaration and the manner in which political institutions reacted as mitigating the extent of the damage," it said.

Still, the company said the events following the martial law imposition deepened political divisions and could potentially hamper policy drives by future governments.

"The increased divisions could weaken future governments' ability to rally popular support for policy changes that are necessary to shore up government finances and economic resilience as the population ages," S&P said.

The credit appraiser said potential security threats related to North Korea continue to weigh on its assessment of South Korea, but forecast the risk of a serious conflict remains "small."

"The regime's behavior in recent years suggests that it is rational and careful about making risky moves ... we view it unlikely that North Korea would push its provocations too far," S&P said.



mlee@yna.co.kr

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Source: Yonhap News (April 15, 2024)