- Published 2026.11.03 12:16
Fitch annual review team visits Korea to inspect key macroeconomic indicators
Structural fiscal weakness and security risks constrain an upgrade
Government must objectively prove its mid-to-long-term debt management plan
A team from global credit rating agency Fitch Ratings arrived in Korea on Nov. 3 to begin official consultations for its sovereign credit rating assessment. While expectations of an upgrade have emerged on the back of a recent export recovery, analysts say structural fiscal vulnerabilities and North Korea-related geopolitical risks have blocked a rating upgrade for 14 years.
According to the Ministry of Economy and Finance, the annual review team, led by Thomas Rookmaaker, head of Asia-Pacific sovereign ratings at Fitch, will visit the ministry, the Bank of Korea and the Ministry of Unification through Nov. 5 to inspect macroeconomic indicators and policies. Based on the review, Fitch plans to announce its assessment result in the fourth quarter of this year. Fitch has kept Korea's rating at 'AA-' with a 'stable' outlook for 14 years since upgrading it to that level in September 2012.
Recently, market participants have raised the possibility of an upgrade, citing strong semiconductor exports and improved tax revenue. In fact, global investment bank Citi has presented a mid-term outlook for a rating upgrade. But the reason the rating has not actually risen despite improved quantitative indicators is that qualitative risk factors are exerting strong downward pressure.
The biggest issue is fiscal soundness, hidden behind a temporary export rebound. Fitch believes that tax revenue growth dependent on the semiconductor business cycle cannot cover structural deficit pressure from population aging and expanding welfare budgets. This means it is difficult to prove mid-to-long-term fiscal sustainability with only a temporary improvement in tax revenue without spending restructuring. Whether the temporarily increased fiscal spending leads to a real expansion of potential growth is also a key assessment target.
The review team's inclusion of a visit to the Ministry of Unification is in the same context. Fitch assigns Korea an 'AA-', one notch lower than S&P Global Ratings' 'AA' or Moody's' 'Aa2'. This is because Fitch weighs North Korea-related geopolitical risks more heavily than other agencies. As long as military tensions persist, it is difficult to secure justification for a rating upgrade through improved fiscal conditions alone.
A sovereign credit rating serves as a benchmark that determines the spread when Korean companies and financial institutions raise funds overseas. In a high-interest-rate and high-exchange-rate environment, if Fitch sends a warning on the rating or outlook, external funding costs are bound to increase. The government plans to arrange a face-to-face meeting between Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il and the review team to explain Korea's economic situation. Whether the government objectively proves concrete fiscal rule implementation measures to defend against tax revenue volatility and a mid-to-long-term debt management plan will determine the actual success or failure of this fourth-quarter assessment.
※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.
