(LEAD) Moody's keeps 'Aa2' rating on S. Korea with stable outlook

Economy 17:10 May 19, 2023

(ATTN: UPDATES with details throughout)
By Kang Yoon-seung

SEOUL, May 19 (Yonhap) -- Global credit appraiser Moody's Investors Service said Friday it has affirmed its credit rating on South Korea "Aa2," with a stable outlook.

Moody's has been maintaining South Korea's sovereign credit rating at "Aa2," the third-highest level on the company's table, since December 2015.

The credit appraiser also expected Asia's No. 4 economy to expand 1.5 percent in 2023. The outlook comes in line with the state-run Korea Development Institute's estimate released last week.

"The credit profile of Korea is underpinned by its strong policy effectiveness, and highly diversified and competitive economy. External buffers remain healthy, while the government's fiscal consolidation goals will keep debt levels in line with advanced economy medians," the appraiser said.

Moody's, however, noted South Korea's weak chip exports may weigh down on the growth as well.

South Korea's exports fell for the seventh consecutive month in April due mainly to sagging global demand for semiconductors. Outbound shipments of chips plunged 41 percent on-year amid the downcycle of the industry.

"Tighter financial conditions, the housing market downturn and weak labor markets can amplify weaker growth, with higher interest rates and fluctuating asset prices presenting risks for vulnerable households," it added.

The Bank of Korea had raised borrowing costs seven straight times to tackle inflation before freezing its key rate at 3.5 percent in February.