(2nd LD) S&P keeps 'AA' rating on S. Korea with stable outlook

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By Kim Soo-yeon

SEOUL, April 26 (Yonhap) -- Global credit appraiser S&P Global Ratings said Tuesday it has maintained its credit rating on South Korea at "AA," with a stable outlook.

S&P has kept South Korea's long-term sovereign credit rating at "AA", the third-highest level on the company's table, since August 2016, when it upgraded the rating from "AA-."

"The stable outlook reflects our expectation that the Korean economy will grow more than most other high-income economies over the next three to five years," S&P said in a statement.

"The outlook is also predicated on our belief that geopolitical risks on the Korean Peninsula will not escalate to the point of hurting Korea's economic fundamentals," it added.

S&P maintained its 2022 growth forecast for the South Korean economy at 2.5 percent.

The agency's growth outlook is the same as the latest projection by the International Monetary Fund. The Bank of Korea forecast Asia's fourth-largest economy to grow 3 percent this year.

The South Korean economy is on a recovery track on the back of robust exports and improving private spending. But it faces heightened external uncertainty, as the Ukraine conflict has jacked up fuel prices, putting upward pressure on inflation.

Despite economic headwinds, S&P forecast South Korea's growth prospects to be one of the "strongest" among high-income economies, as its growth will likely be fueled by robust exports and investments.

It said Asia's fourth-largest economy will likely register average annual real GDP per capita growth of 2.4 percent for 2022-25 and the country's per capita GDP will rise to US$40,000 by 2025 from the current $34,000.

But the credit appraiser voiced concerns the country's household debt remains "very high" and could "constrain future growth of domestic consumption."

S&P said South Korea's fiscal deficit is expected to narrow in the next two years. It forecast the general government balance to return to a surplus by 2024.

The rating agency said the fiscal deficit for South Korea will likely be at 3 percent of the GDP in 2022 and 1.2 percent in 2023.

South Korea's national debt has grown at a fast pace in recent years due to expansionary fiscal spending aimed at tackling the COVID-19 pandemic.

The national debt is forecast to reach 1,075.7 trillion won ($858 billion) this year, marking the first time the debt would exceed the 1,000 trillion-won mark, according to an estimate by South Korea's finance ministry.

The government forecast the fiscal deficit is likely to reach 70.8 trillion won, equivalent to 3.3 percent of the GDP, in 2022.

sooyeon@yna.co.kr
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