Moody's Maintains South Korea's Credit Rating at 'Aa2'... Growth Rate Forecasted at 1.5%

International credit rating agency Moody's has maintained South Korea's sovereign credit rating at 'Aa2', the same as before. The rating outlook was also kept as 'stable'.

In a report on the 19th, Moody's cited "strong policy effectiveness and a highly diversified and competitive economy" as the basis for the sovereign credit rating evaluation.

It also explained that it reflected sound external stability and a strong commitment to fiscal consolidation. Aa2 is the third highest rating in Moody's evaluation, following Aaa and Aa1.

This year, South Korea's economic growth forecast was presented at 1.5%, slightly downgraded from the 1.6% forecast given in March.

Moody's viewed household and corporate debt as burdens on consumption and investment sentiment. However, it assessed that risks have been mitigated by soundness regulations on real estate and household loans, such as loan-to-value ratio (LTV) and debt-to-income ratio (DTI).

Regarding the recent global banking system crisis, Moody's stated, "The Korean banking sector is currently less directly exposed to risks," but also noted, "Since Korea is an export-driven economy, it could be affected if volatility in global financial markets expands."

Moody's identified factors that could lead to an upgrade of South Korea's credit rating in the future, including structural reforms to increase gross domestic product (GDP) growth, policies to overcome aging population, and reduction of geopolitical risks.

On the other hand, it mentioned that escalating military tensions on the Korean Peninsula, which could negatively impact South Korea's economic growth, might be factors that could lower the country's credit rating.

Moody's forecasted, "South Korea's economy will slow somewhat this year due to semiconductor market downturn, monetary tightening, and real estate market adjustments," but added, "It could rebound in the second half of the year as the semiconductor market recovers."