Fitch affirms South Korea's 'AA-' rating, stable outlook
Fitch Ratings has reaffirmed South Korea’s sovereign rating at AA- with a stable outlook.
It’s the 4th highest level on the agency’s sovereign ratings table and Fitch has had AA- for South Korea since September 2012 when it upgraded one notch from A+.
The latest decision comes despite political unrest following President Yoon Suk Yeol’s declaration of martial law on December 3 and his subsequent impeachment, according to reports.
“South Korea is in the midst of a political crisis that we believe will be resolved in a constitutional manner that does not fundamentally change our assessment of institutions or governance,” the agency said in its latest report.
Fitch will continue to monitor risks related to political volatility as uncertainty persists.
The agency said South Korea’s fundamentals are stable with strong external finances, steady macro and a dynamic export sector.
Fitch has revised down its growth forecast for South Korea to 1.7% for this year from 2% earlier, citing negative impact of political uncertainty on business confidence.
The latest forecast is slightly more optimistic than the 1.6% growth projection by the Bank of Korea which cited the ongoing political crisis.
“Exports will moderate, partly as we expect 10% global tariff by the new US administration and downside risks are high given US tariffs,” Fitch said.
South Korea’s exports, one of its key growth engines, fell for the first time in 16 months in January, according to government data.
On the positive side, Fitch noted the government’s plan to front-load 75% of 2025 fiscal spending in the first half of the year.
The agency also pointed out household debt is high compared to other advanced economies.
However, it noted borrowing has risen slightly in recent quarters as interest rates have eased and apartment prices have stabilized.
Fitch said nation’s external finances remain strong supported by persistent current account surpluses.
The South Korean government said Fitch’s latest rating decision reaffirms its unwavering confidence in the economy.
“It will alleviate a big part of foreign investors’ concerns about Korea’s external credibility,” the finance ministry said in a statement.
