Moody’s keeps Korea’s credit rating with stable outlook

(Reuters/Yonhap)

Moody’s Investors Service Inc., one of the three major credit rating agencies, has reaffirmed South Korea’s current rating of Aa2 with a stable outlook in a report released last week, marking the first such report since the launch of the new Lee Jae-myung administration.

The agency, however, warned that geopolitical risks and a lack of momentum for structural reform threaten Korea’s growth prospects.

In the report, Moody’s projected Korea’s economy to grow 1 percent this year and 1.6 percent in 2026.

Moody’s reviews Korea’s sovereign credit rating every two years.

The agency cited the easing of geopolitical tensions on the Korean peninsula and the implementation of structural reforms as upside factors that could boost potential growth and mitigate the impact of population aging.

However, it also listed several downside risks including heightened geopolitical tensions such as potential military conflicts, a decline in structural potential growth due to internal and external shocks, and the lack of reforms to address the fiscal burden of an aging population.