Fitch maintains Korea’s sovereign rating at stable ‘AA-‘

Despite Japan's economic sanctions on Korea in recent months, global credit appraiser Fitch on Aug. 8 reaffirmed its stable outlook for Korea with an "AA-" rating.

"Even with geopolitical risks related to North Korea and structural challenges, Korea balances robust external finances, sound fiscal management and steady macroeconomic performance," Fitch said in a report posted on its website. "Korea's economic momentum has slowed considerably over the past year due to U.S.-China trade tensions but nevertheless, underlying growth performance remains sound and broadly in line with peers."

The agency forecast that Korea's economic growth will slow to 2% this year from 2.7% last year, noting that "the downturn in the semiconductor sector is driving a contraction in exports and weighing on facilities investment."

On Korea's removal from a Japanese whitelist of trusted export partners, Fitch said "these actions are likely to disrupt supply chains and create uncertainty for Korean firms' ability to import inputs from Japan."

Turning to the situation on the Korean Peninsula, the agency said geopolitical risk weighs on Korea's rating. Noting that progress on denuclearization negotiations had stalled since the summit in late February this year between the U.S. and North Korea in Hanoi, Vietnam, it said the two Koreas had "made strides to improve cultural linkages despite the stalled denuclearization talks."


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