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S&P keeps 'AA' rating on S. Korea with stable outlook

By Yonhap

Published : April 30, 2024 - 19:09

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The headquarters of Standard and Poor's in New York. (Getty Images) The headquarters of Standard and Poor's in New York. (Getty Images)

Global credit appraiser S&P Global Ratings said Tuesday 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 the third-highest level on the company's table since August 2016, when it upgraded the rating by one notch from "AA-."

"The stable rating outlook reflects our expectation that (South) Korea will maintain average growth rates that are higher than most other high-income economies for at least the next three to five years," the agency said in a report.

S&P expected the South Korean economy to grow 2.2 percent this year, accelerating from last year's 1.4 percent gain.

"Over the next three years, real gross domestic product growth should be sustained at levels close to or above 2 percent annually," the agency said, adding that both exports and domestic demand "should strengthen from last year."

The forecast was on a par with the growth outlook by the South Korean government and the Organization for Economic Cooperation and Development.

The Bank of Korea forecast 2.1 percent growth, and the International Monetary Fund presented a 2.3 percent expansion.

Exports, a key economic growth engine for South Korea, rose for the sixth consecutive month in March after a yearlong downturn, driven by solid global demand for semiconductors.

The agency also forecast that inflation would narrow to 2.6 percent for 2024 from last year's 3.6 percent, which "should allow interest rates to decline from levels in 2023."

Retail prices have been trending down, but inflationary pressure has eased at a slower-than-expected pace due to the high prices of fruit, farm produce and energy.

As for public finances, the agency expected the government deficit could rebound to 1 percent of GDP this year due mainly to weaker revenue collection stemming from relatively weak economic growth last year.

"Geopolitical risks continue to weigh on the sovereign ratings on South Korea. However, we do not believe that recent developments in the Democratic Republic of Korea (North Korea) have materially increased the risks of a serious economic or security event on the peninsula," the report read. (Yonhap)