Korea’s fiscal health questioned by global credit rating agency

[Photo by EPA / Yonhap]

A global credit rating agency is expressing its doubts about South Korea fiscal health.

In a written interview with the Maeil Business Newspaper on Tuesday, Jeremy Zook, director of Asia sovereign ratings at Fitch Ratings, said that fiscal strength is no longer considered a positive factor in assessing Korea’s sovereign credit rating, but is now viewed as a neutral element, citing the nation’s widening budget deficit since the Covid-19 pandemic. Jeremy is Fitch’s primary sovereign analyst for South Korea and part of the committee that reviews South Korea’s credit rating.

Global rating agencies have given Korea high marks for fiscal soundness in the past, which may no longer be the case, according to Zook.

Prime Minister Han Duck-soo speaks during a Cabinet meeting at the Government Complex in Jongno-gu, Seoul, on August 13. [Photo by Yonhap]

This comes amid a conflict between the government and the ruling party. During a cabinet meeting hosted by Prime Minister Han Duck-soo on the same day, the government decided to request President Yoon Suk Yeol’s veto of a bill to support people’s livelihoods. The bill, passed by the National Assembly under the leadership of the main opposition party, proposes to provide cash assistance of 250,000 won ($183) to 350,000 won to all citizens.

If Yoon accepts the government’s request, the bill will be sent back to the National Assembly for reconsideration.

“Providing support payments to all citizens has uncertain effects on stimulating consumption, while requiring the issuance of large government bonds to cover these payments, with the amount exceeding 13 trillion won. This would undermine fiscal soundness and impose a significant burden on future generations,” Han said in explanation of the government’s decision.