hankyoreh

Christian de Guzman, senior vice president at Moody’s. (provided by Moody’s)

“South Korea’s finances are in better shape than those of other advanced economies, given that debt has increased in most countries due to the COVID-19 pandemic.”

Christian de Guzman, senior vice president at Moody’s, shared a positive outlook on South Korea’s financial situation in an email interview with the Hankyoreh on Jan. 15. One of the world’s top three credit rating businesses, Moody’s has maintained South Korea’s national credit rating at its third-highest “Aa2” level since upgrading it in December 2015.

Commenting on the sharp rise in South Korea’s national debt ratio from 38.1% in 2019 to 43.9% last year, de Guzman explained, “In most countries, tax revenue has decreased and expenditures have risen due to COVID-19, and national debt ratios have also increased as a result.”

“Compared with the emerging economies, South Korea and other advanced economies have more potential to shoulder debt thanks to their abundant funding power,” he added.

“Other advanced economies have experienced more economic contraction than South Korea, and their debt ratios have become relatively worse,” he said.

De Guzman also explained, “It had been predicted that South Korea’s national debt ratio would exceed 60% by 2040 due to its major financial risk factors, namely population aging and the subsequent decline in the working-age population, and it looks like the pandemic will exacerbate that.”

“South Korea’s financial margin is going to come down to efforts to stabilize the increase in national debt once the COVID-19 pandemic is over,” he predicted.

“We’re closely monitoring the discussion on fiscal regulations, and once the regulations are in place, they could provide a key standard for determining South Korea’s fiscal soundness,” he said. Last year, the South Korean government submitted a plan to the National Assembly for keeping the national debt ratio within 60% of GDP and the overall fiscal balance within -3% of GDP. Discussions are expected to begin next month.

De Guzman predicted a 2021 economic growth rate of 3.1% for South Korea, or just under the government’s projection of 3.2%.

“After experiencing its first negative growth since the 1997 Asian financial crisis last year, the South Korean economy will grow by 3.1% this year,” he said.

“That’s a high level compared with the growth rates over the past several years, but there’s also a baseline effect from the minus growth last year,” he explained.

He also predicted a “strong likelihood of an uneven and asymmetrical recovery not just between countries but also within the South Korean economy,” adding that the “same thing will happen in the job market.” As examples, he mentioned the tourism and retail sectors, which have suffered under social distancing measures, and the semiconductor and electronics industries, which have seen sharp rises in demand.

By Lee Jeong-hun, staff reporter

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