SEOUL, April 28 (Yonhap) — Global credit appraiser Standard & Poor’s Global Ratings (S&P) said Wednesday it has maintained its credit rating on South Korea at “AA,” with a stable outlook.
S&P has kept South Korea’s long-term sovereign credit rating at “AA”, the third-highest level on the company’s table, since August 2016, when it upgraded the rating from “AA-.” The country’s short-term credit rating was kept at “A-1+.”
“The stable outlook reflects our expectation that the Korean economy will continue to exhibit stronger growth than most other high-income economies and that will help its fiscal repair process,” S&P said in a statement.
S&P forecast the South Korean economy to expand 3.6 percent this year, following a 1 percent contraction last year. It expected Asia’s fourth-largest economy to expand 3.1 percent next year.
The agency’s growth outlook for this year is higher than the 3 percent growth estimate by the Bank of Korea (BOK) and the 3.3 percent growth forecast by the Organization for Economic Cooperation and Development (OECD). The International Monetary Fund (IMF) put the 2021 growth estimate at 3.6 percent.
The South Korean economy is on a recovery track on the back of robust exports of chips and autos.
Asia’s fourth-largest economy grew 1.6 percent in the first quarter from three months earlier, accelerating from a 1.2 percent on-quarter gain in the fourth quarter of last year, according to the BOK.
S&P said the country’s fiscal deficit is expected to widen this year on fiscal spending, but it is likely to return to surplus by 2023.
The national debt, which covers bond sales and financial borrowing by central and provincial governments, reached a record 846.9 trillion won (US$750.5 billion) as of end-December, up 123.7 trillion won from the previous year.
Accordingly, the country’s debt-to-gross domestic product (GDP) ratio came to 44 percent last year, up from 37.7 percent the previous year, according to Seoul’s finance ministry. The ratio may reach 48.2 percent this year.
“Despite the deficits that we project between 2020-2022, the net general government debt burden should remain relatively light in the next few years,” the agency said.