S&P Mentions 'Interest Rate Hike Period, Increased Uncertainty'... Choo Kyung-ho Says "Korea's External Soundness is Good"

Deputy Prime Minister for Economy Choo Kyung-ho is attending the plenary session of the National Assembly's Planning and Finance Committee on the 26th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Sejong=Reporter Son Seon-hee] The international credit rating agency Standard & Poor's (S&P) mentioned on the 26th the increasing uncertainty in the Korean economy and the rising household debt burden due to the acceleration of global interest rate hikes. S&P is scheduled to announce Korea's credit rating in the first half of next year.

According to the Ministry of Economy and Finance, S&P will conduct its annual consultation with Korea over three days from the 26th to the 28th, starting with a meeting with Deputy Prime Minister Choo. This annual consultation is the first time since the new government took office that a credit rating agency has visited Korea in person for face-to-face discussions.

The S&P delegation consists of Kim Eng Tan, Senior Director for Asia-Pacific Sovereign Ratings, Philip Jung, Senior Director for Asian Financial Institutions Ratings, and Lee Pan Pua, Director for Asia-Pacific Sovereign Ratings. During the annual consultation, they will meet with key domestic economic ministries and institutions including the Ministry of Economy and Finance, Ministry of Trade, Industry and Energy, Financial Services Commission, Bank of Korea, and Korea Development Institute to discuss sectoral trends, outlooks, and policy responses.

During the meeting with the S&P delegation, Deputy Prime Minister Choo introduced policies pursued by the new government, including private, corporate, and market-centered economic management, structural reforms, and a shift to a sound fiscal stance. He particularly emphasized that, given the rapid increase in debt ratios during the previous administration, the new fiscal rules will be legislated to strictly maintain a sound fiscal stance.

The Ministry of Economy and Finance reported that S&P positively evaluated Korea's shift to a 'sound fiscal' stance.

However, S&P inquired about the increased uncertainty and household debt burden due to the acceleration of global interest rate hikes. In response, Deputy Prime Minister Choo stated, "Considering the low delinquency rate, high proportion of loans to high-credit borrowers, and the soundness of financial institutions, the possibility of this leading to structural risks is limited." He added, "We will consistently pursue stable management of household debt while simultaneously alleviating repayment burdens for vulnerable groups." He further noted, "Excessive debt in all sectors, including household, corporate, and fiscal, acts as a burden on economic fundamentals, so we will manage it with special vigilance going forward."

Regarding external soundness, he explained, "Although the Korean economy is affected by the recent expansion of global uncertainties, considering factors such as foreign currency LCR, foreign exchange reserves, and net external assets, Korea's external soundness remains favorable." The Ministry of Economy and Finance also reported that S&P expressed full agreement with this assessment.

S&P is expected to announce Korea's credit rating in the first half of next year. Since 2016, S&P's credit rating and outlook for Korea have been maintained at the highest level of 'AA - Stable.'