SEOUL– The South Korean economy has been weighed down by heightened global uncertainty, but it has maintained robust external soundness, the finance minister said Monday.

Finance Minister Choo Kyung-ho made the remarks during his meeting with the delegation of global credit appraiser S&P Global Ratings, led by Kim Eng Tan, senior director of Asia-Pacific sovereign ratings at the agency.

The delegation kicked off its annual consultations with the Korean government and other organizations Monday to discuss the country’s sovereign credit rating and economic situations. The consultations will run through Wednesday.

In the meeting, Choo said South Korea’s external soundness remains in good shape in light of its foreign currency liquidity conditions, the foreign reserves and its net overseas assets, and S&P shared the view, according to the finance ministry.

The South Korean currency has sharply weakened against the U.S. dollar amid worries that the U.S. Federal Reserve’s aggressive monetary tightening could tip the U.S. economy to a recession.
Market expectations are growing that the Bank of Korea (BOK) is likely to raise its policy rate by another 50 basis points in the coming months in the wake of the Fed’s latest third straight 75 basis-point rate hike.

Asked about the impact of rising interest rates on household debt, Choo said the government plans to manage the issue with “extra” caution as heavy indebtedness in all sectors spanning households, companies and the government could weigh on the economic fundamentals.

In July, S&P forecast its 2022 inflation outlook for South Korea at 5 percent and expected Asia’s fourth-largest economy to grow 2.6 percent this year.

S&P has maintained its credit rating on South Korea at “AA,” the third-highest level on the company’s table, with a stable outlook.

Based on the outcome of the annual consultations, S&P plans to announce its decision on South Korea’s sovereign rating in the first half of next year.

Source: Yonhap News Agency