S&P maintains AA credit rating

Home > Business > Economy

print dictionary print

S&P maintains AA credit rating

Standard & Poor’s (S&P) maintained Korea’s credit rating at AA with a stable outlook, expressing optimism in its fiscal and monetary situation.

“Our ratings on Korea reflect the country’s favorable policy environment, sound fiscal position, ample monetary flexibility and solid net external creditor position,” read a report from the credit rating agency released Wednesday.

Korea has kept S&P’s AA rating since August 2016, when it was raised from AA-.

The agency remained particularly confident about the country’s fiscal health.

“The Korean government’s healthy fiscal position offers further support for the sovereign’s creditworthiness,” it said.

The country’s debt-to-GDP ratio was at 37.1 percent this year compared to the Organisation for Economic Cooperation and Development average of around 110 percent, according to the Ministry of Economy and Finance.

That ratio is expected to rise to 39.8 percent next year under the government’s expansionary fiscal drive, which includes plans to issue 60.2 trillion won ($52 billion) worth of bonds to cover a record 513.5 trillion won budget next year.

S&P acknowledged recent economic woes faced by Korea such as slowing trade.

“Exports growth has been lackluster in 2019 to date, owing to weaker global and regional trade conditions,” read the report. “We believe the recent Korea-Japan trade spat has also led to increasing uncertainties and could weigh on investor sentiment.”

Despite the challenges, overseas sentiment on Korea’s economy and financial markets has lately improved.

The credit default swap (CDS) premium on Korean foreign exchange stabilization bonds with a five-year maturity reached a 12-year low of 27 basis points on Tuesday.

The CDS premium is a measure of the credit default risk.

Minister of Economy and Finance Hong Nam-ki emphasized foreign confidence in the Korean market.

“Despite recent difficult conditions, this serves to indicate that foreign investors and the international community trust the Korean economy,” said Hong in a Facebook post on Wednesday.

Local assessments of the broader economic situation have been downbeat.

Exports recorded on-year declines for the 11th consecutive month in October, while the country posted its first-ever negative inflation in September.

The Korea Development Institute expressed concerns in a monthly assessment of the economy.

“The Korean economy is exhibiting sluggishness mainly in exports and investment,” read the state-run think tank’s report. “Facilities investment declined less, but construction investment stagnated.”

The equipment investment index, which serves as a measure of facilities investment, fell 1.6 percent in September from the previous year, while the value of completed construction in the same month declined 7.4 percent.

Last month, S&P revised Korea’s economic growth forecast for this year to 1.8 percent, compared to its estimate of 2.5 percent at the start of the year.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)