I. Key Points from S&P Global Ratings
On April 29, S&P Global Ratings announced that it affirms the Republic of Korea’s sovereign credit rating at ‘AA’ with a stable outlook. It notes that while heightened uncertainty in global energy markets stemming from conflicts in the Middle East poses a potential downside risk to Korea’s economic outlook in 2026, the country’s strong industrial competitiveness, particularly in the semiconductor sector, and prudent fiscal policy are expected to help mitigate such pressures. The agency also projects that Korea will maintain a higher average growth rate than most other high-income economies over the next three to four years.
S&P forecasts Korea’s economic growth to accelerate in 2026 following a slowdown to 1.0% year-on-year in 2025. In particular, it highlights Korea’s leading position in IT industries, including semiconductors, as well as its strong competitiveness in sectors such as shipbuilding. From 2026 to 2029, the economy is projected to grow at an average trend rate of around 2.1% per year in per capita GDP terms, with per capita GDP expected to exceed USD 44,000 by 2029.
S&P also assesses that Korea’s institutional and policy framework remains a key factor underpinning its sovereign creditworthiness. While the unexpected declaration of martial law in 2024 somewhat undermined confidence in political stability, the agency assessed that its swift reversal and response, along with the inauguration of a new government through elections, helped mitigate the negative impact. Regarding the recent volatility in global energy markets, S&P acknowledges that Korea is a major importer of crude oil and natural gas. However, the country is considered to have sufficient buffers against potential energy supply shocks, supported by diversified sources of imports and adequate strategic petroleum reserves.
On the fiscal side, S&P expects the general government fiscal deficit to reach around 1.4% of GDP in 2026, before narrowing to approximately 1.1% of GDP in 2027. Korea’s government debt burden remains relatively low, with net debt projected at about 9% of GDP in 2026.
S&P further assesses that contingent liability risks stemming from the domestic financial sector remain limited. However, the agency estimates that the debt held by non-financial public enterprises accounts for around 20% of GDP, noting that a prolonged period of heightened uncertainty in global energy markets, particularly due to conflicts in the Middle East, could place financial strain on major state-owned energy companies. In addition, S&P views the potential costs associated with Korean unification - in the event of a collapse of the North Korean regime - as highly uncertain and substantial contingent liabilities, representing a key downside risk to Korea’s sovereign credit profile.
S&P highlights Korea’s strong external position - underpinned by a solid net external asset position and a sustained current account surplus - as a firm anchor for its sovereign credit rating. Supported by robust semiconductor exports, the current account surplus reached 6.6% of GDP in 2025. The agency further expects the surplus to remain above 6% of GDP over the next three to four years, supporting a gradual appreciation of the Korean won. Moreover, Korea’s flexible exchange rate regime, together with the breadth and depth of its actively traded foreign exchange market, is assessed to provide a strong external buffer for the economy.
II. Assessment and Policy Response
S&P’s latest announcement affirming Korea’s sovereign credit rating and outlook at ‘AA, stable’ once again demonstrates its strong confidence in the competitiveness and resilience of the Korean economy. In particular, this marks the third consecutive confirmation by the three major global credit rating agencies, following earlier affirmations by Fitch Ratings and Moody’s this year, of Korea’s sovereign rating and outlook at stable levels. This underscores that, despite elevated domestic and external uncertainties, including developments in the Middle East, positive assessments of the Korean economy from the international community remain firm.
Prior to S&P’s rating announcement, the government actively engaged in the annual consultation process, with Deputy Prime Minister Koo Yun Cheol holding a meeting with S&P’s annual consultation team in March to clearly explain the competitiveness of the Korean economy and the direction of its policy framework. Relevant ministries also worked closely together to support the consultation. Going forward, the government will continue to engage closely with global credit rating agencies and make every effort to maintain Korea’s sovereign creditworthiness at a stable level.
※ This document is a summary of the press release by S&P Global Ratings provided for the convenience of the media. For full details and the exact language, please refer to the original release available at the link below:
https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3553472
