By Sohn JiAe
Moody’s Investors Service has kept Korea’s credit rating at Aa2.
According to the Ministry of Strategy and Finance, the ratings firm announced its decision on July 5 to maintain an Aa2 rating for Korea, marking one year and seven months that the local economy has maintained such an investment grade rating.
Aa2 is the third-highest rating for Moody’s. In December 2015, Moody’s raised the nation’s sovereign rating from Aa3 to Aa2.
Moody’s cited the credit strengths underpinning the country’s Aa2 ratings, noting Korea’s “high degree of economic resiliency, fiscal discipline and moderate government debt, robust institutions, and, finally, very low external vulnerabilities.”
The ratings agency also raised Korea’s 2017 economy growth outlook by 0.3 percent, from 2.5 percent to 2.8 percent.
It predicts an economic growth rate for Korea of 2 to 3 percent over the next five years, citing “the nation’s very strong institutions and an administration that is both consistent in policy formulation and effective in its implementation.”
“The government’s prudent fiscal policy stance and relatively robust growth prospects over the medium term will be positive for the country’s government debt trajectory,” it added.
Moody’s also said that the launch of the new Moon Jae-in administration has resolved any uncertainty about political leadership, and has allowed the new president to come in and focus on formulating policies that address the nation’s structural economic challenges.
If a supplementary budget submitted in June to the National Assembly is to be passed, it would lead to higher, hard-to-reverse current spending, Moody’s said. “However, we expect the government to match higher spending with tax code revisions to bolster government revenues.”