Containers are piled up at a port in the southeastern port city of Busan on March 13. (Yonhap)
Global credit appraiser Fitch Ratings said Monday it has reaffirmed South Korea's sovereign rating at "AA-" with a stable outlook, while suggesting an economic growth of 1.2 percent this year.
Fitch's rating for South Korea has been AA-, the fourth-highest level on the agency's table, since September 2012.
"Korea's rating balances robust external finances, resilient macroeconomic performance and a dynamic export sector against geopolitical risks related to North Korea, lagging governance indicators and structural challenges from an ageing population," the credit appraiser said in a release.
"Economic growth is likely to decelerate in the near term, but credit and policy buffers remain sufficient to manage these pressures," it added.
South Korea's finance ministry welcomed the latest update, pointing out it reflected the government's efforts to stabilize the market.
"(The rating) has reaffirmed the positive assessment on the South Korean economy's internal and external soundness," the Ministry of Economy and Finance said in a statement.
Fitch said South Korea's economy is expected to grow 1.2 percent on-year in 2023, compared with a 2.6-percent growth tallied in 2022, as "the economy faces headwinds from subdued global growth, high interest rates and still elevated inflation."
The latest forecast is down from a 1.9 percent growth estimate suggested in September.
Touching on the country's key rates, Fitch said it expects the country's central bank to hold the currently level of 3.5 percent through 2023.
"Domestic inflationary pressure is easing, but external considerations around the U.S. Fed's rate path could prompt additional tightening in the near term," the credit appraiser said.
The Bank of Korea kept the benchmark interest rate unchanged at 3.5 percent for the first time in 10 months in February. The central bank previously had seven straight rate hikes since April last year to tame inflation.
The credit appraiser added South Korea's inflation is anticipated to reach 2 percent by the end of this year, pointing out the BOK may also cut the key rate by 0.5 percentage point in 2024.
Data showed earlier consumer prices, a key gauge of inflation, rose 4.8 percent last month from a year earlier, slowing from 5.2 percent growth posted in January.
The company added South Korea households have "one of the highest levels of debt globally at 105.3 percent of GDP, and the debt-servicing burden has risen rapidly as monetary policy tightened."
Fitch, however, added South Korea's high debt-servicing costs are not likely to give risks to the financial sector, although it is expected to weaken domestic consumption.
South Korea's exports, meanwhile, are expected to remain sluggish in the first half of 2023 due to the weak performances of semiconductors, it said.
Earlier in the day, South Korea's customs office said the country's exports fell 16.2 percent on-year in the first 10 days of March due to sluggish shipments of chips, which plunged 41.2 percent over the period.
South Korea's exports from Jan. 1 to Friday sank 12.6 percent from the previous year, with its trade deficits reaching $22.7 billion so far.
Fitch added South Korea's tensions with North Korea "remain heightened with limited diplomatic engagement over the past few years," although it has not "restarted its nuclear weapon tests, which have been paused since 2017." (Yonhap)
MOST POPULAR