In a recent report titled "Korean Court Decision on Presidential Impeachment Eases Political Risk," Fitch said the ruling eliminated a significant political uncertainty factor that had been looming over the nation's economic outlook.
"We had assumed that the court would uphold the impeachment when we affirmed Korea’s ‘AA-’ sovereign rating with a Stable Outlook in February 2025," Fitch noted in its assessment of the political landscape.
Major financial institutions including J.P. Morgan and Citigroup had similarly predicted the impeachment outcome, with both including early presidential elections in their second-quarter forecasts for the Korean peninsula.
While the impeachment ruling has removed immediate political uncertainty, Fitch expressed concerns about potential fiscal policy shifts depending on which candidate wins the upcoming presidential election.
"We believe it is likely a Democratic Party government would adopt a looser fiscal policy stance than the current administration," Fitch reported, though adding that regardless of the candidate elected, the South Korean government is likely to take proactive policy responses to address the economy issues including national debt.
South Korea's national debt increased by 48.6 trillion won last year to reach 1,175.2 trillion won, while the managed fiscal balance recorded a deficit of 104.8 trillion won, equivalent to about 4.1 percent of GDP.
The international ratings firm ended its report with a solemn warning that the upward trend in government debt may "put downward pressure over the medium term" to the economy.
reporter
Kim Dong-young
davekim0807@ajupress.com
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