Moody's affirms Korea's Aa2 rating, revises up '21 GDP growth outlook to 3.5%

Moody’s Investor Service kept South Korea’s sovereign credit rating at its third-highest Aa2 with a stable outlook as it upped growth forecast for the exports-reliant economy to 3.5 percent on faster recovery in global commerce backed by accommodative policy strategy.

Korea remains second-highest on the Moody’s rank among Asian countries after Singapore, according to the Korean Ministry of Economy and Finance.

Korea has “very strong fundamentals that have underpinned its resilient recovery from the pandemic shock,” said Moody’s in its report published on Tuesday. The global credit rating agency forecast Korea’s GDP to grow 3.5 percent this year, up from February projection of 3.1 percent, on the back of strong global demand for the country’s export items and the government’s accommodative fiscal strategy.

Rising government debt, aging population, and geopolitical risk from North Korea, however, would continue to pose challenges for Korea’s economy, noted Moody’s.

Korea’s debt level has risen to historically high levels to test its “long-established track record of fiscal discipline,” said the agency. But it still expects the country’s “debt affordability to remain strong” with gradual recovery in revenue and cost of debts staying “broadly stable” amid low interest rate environment.

Earlier on April 28, Standard & Poor’s Global Ratings also kept Korea’s credit rating unchanged at third-highest grade of AA with a stable outlook, citing the country’s stable economic recovery from Covid-19 slowdown. The agency projected Korea’s economy to rebound 3.6 percent this year.

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