Moody's and Korea Ratings Present Joint Webinar on "Building Resilience in a Changing Economic Environment"
Moody's and Korea Ratings have projected that the growth momentum of the semiconductor and defense industries will continue next year, driven by ongoing investments in artificial intelligence (AI) and persistent geopolitical conflicts. In contrast, they expect domestic oil, chemical, construction, and steel sectors to underperform due to industry downturns.
On November 25, Moody's and Korea Ratings held a joint media briefing titled "2026 Korea Credit Outlook - Building Resilience in a Changing Economic Environment," where they shared these forecasts.
Moody's predicted that global AI investment will present opportunities for Asia-Pacific countries, including Korea. Sean Hwang, Senior Research Analyst at Moody's, stated, "Although rapid technological transitions such as AI innovation introduce uncertainties in the medium to long term, in the short term, as seen with Korean semiconductor companies, there are more opportunities for Asia-Pacific firms."
He further forecast that AI investment will continue over the next few years. "Due to AI innovation, demand for data centers will inevitably persist for the next several years," he explained. "Infrastructure investments by American hyperscalers have increased significantly this year and are expected to rise further next year." He added, "Focusing on the Asia-Pacific region alone, data center capacity is expected to double by 2030 compared to current levels."
He also identified the pace of AI development and adoption as key factors to monitor in the coming years, warning that a lack of tangible results from AI investments could pose risks. "If sufficient revenue generation does not materialize in the long term, or if competition intensifies excessively, there are certainly medium- to long-term risks," he said.
In addition, he assessed that the defense industry is benefiting from increased geopolitical tensions. "Next year, the global performance of the aerospace and defense industry is expected to grow by an average of 10-12% in operating profit, driven by rising defense expenditures worldwide," he said, attributing this to continued increases in defense budgets among major countries.
He continued, "It will not be possible to fully meet all the announced defense industry capacity and supply chain investment plans within Europe," explaining that American and Korean companies are poised to benefit in the medium to long term.
Korea Ratings projected that global low growth, China's economic slowdown, and protectionism in 2026 will negatively impact the entire domestic industry. Among these, the petrochemical, construction, steel, and secondary battery sectors are expected to face unfavorable conditions.
The petrochemical industry is experiencing a prolonged downturn. Due to weak demand and oversupply, product spreads have remained at low levels. Kwon Gihyuk, Head of Corporate Evaluation at Korea Ratings, said, "The petrochemical sector is suffering from both weak demand and oversupply. Next year, global ethylene capacity expansions are anticipated, and due to global low growth, the likelihood of a significant demand recovery is low." He added, "Credit rating adjustments have taken place over the past three years, and future prospects depend on the content of business restructuring, feasibility of execution, and expected outcomes."
Construction is also expected to remain sluggish in most regions except for Seoul and some parts of the capital area. A series of safety incidents and strengthened government regulations are likely to increase overall uncertainty in the construction industry. "With reduced construction investment, the sales base is shrinking, and rising safety management costs are reducing profit generation," he said. "As bad debt expenses from accounts receivable and contingent liability losses increase, and if safety risks materialize, there could be heightened downward pressure on construction companies' credit ratings."
For the steel industry, he assessed that weak demand and increased trade uncertainty are compounding industry burdens. "Financially, the steel sector has maintained sound ratios," he noted, "but going forward, the need to address ESG (environmental, social, and governance) issues such as carbon emission reductions and investments in overseas facilities will increase funding burdens. If performance deteriorates and excessive debt accumulates, credit risk could escalate."
Regarding secondary batteries, he projected that competition with Chinese companies in markets outside the United States will be a significant challenge. "Debt has increased substantially due to facility investments," he said. "If investment returns continue to be delayed, there could be growing downward pressure on credit ratings in the future."
He also predicted that, from a macro perspective in the financial sector, uncertainty in the currency system will become a credit issue. "The surge in gold prices and the approval of dollar stablecoins indicate that the dollar-centered global currency system is being shaken," he said. "This situation could entrench or amplify the weakness and volatility of the Korean won, which is a non-key currency." He added, "Due to these factors and continued domestic demand for dollars, it is highly likely that the won will remain weak going forward."
Government policy is also a factor to monitor. "In terms of policy, we are watching whether stronger penalties for serious industrial accidents and the so-called Yellow Envelope Act could dampen investment, particularly in domestic construction," he said. "With the impact of the revised Commercial Act, there may now be a need for changes in the support potential among affiliates within business groups in case of contingencies," he added.
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