Fitch foresees upgrade of Korea's 2024 growth projection

The credit rating agency said robust exports and consumer spending is likely to prompt an upward revision of Korea's economic growth forecast for this year.

Jeremy Zook, a director at Sovereigns of Fitch Ratings, speaks on Friday at a press conference in Yeouido, western Seoul. [YONHAP]

Fitch Ratings will likely upgrade its projection of Korea's economic growth for this year due primarily to robust exports and consumer spending, a director of the U.S. credit rating agency said on Friday.

The growth forecast is expected to be revised from the current 2.1 percent in the global economic outlook scheduled to be released in June, said Jeremy Zook, a director at Sovereigns of Fitch Ratings at a press conference in Yeouido, western Seoul on Friday.

Korea posted higher-than-expected growth of 1.3 percent in the first quarter, according to data released by Bank of Korea on Thursday, vastly surpassing Fitch's prediction of gross domestic product (GDP) growth around 0.5 percent compared to the previous quarter by more than twofold.

“Korea’s economic recovery is underway, driven by external demand and robust external finances,” Zook noted.

A continual rise in global investment in AI and an increase in household spending on products over services will have a positive effect on the overall outlook for the country’s exports.

Fitch has reaffirmed Korea’s sovereign rating at ‘AA-,' with a stable outlook.

However, fiscal consolidation undertaken by the Yoon Suk Yeol administration is expected to proceed modestly given the that opposition Democratic Party secured a landslide victory over the president's party, Zook said, referring to this month’s parliamentary election. The outcome necessitates negotiation and cooperation on fiscal and economic policies, which may result in a gradual fiscal consolidation.

The nation’s current level of household debt has minimal impact on the national credit rating, but the government debt ratio has increased significantly during the Covid-19 pandemic.

This could be worrisome as it could have an adverse impact on the credit rating in the mid to long term. Korea is susceptible to such consequences since the country has to incur additional fiscal expenditures due to the pressure of aging and the population decline.

BY CHOI HAE-JIN [choi.haejin@joongang.co.kr]