Moody's Assigns Aa2 Senior Unsecured Ratings to Government of Korea's Euro-Denominated Notes

Strategic Insights -

The Government of Korea is set to issue Euro-denominated notes with prospective maturities of 3-7 years, which will constitute direct, unconditional, and unsubordinated external obligations of the government. The bonds will rank pari passu with all current and future senior unsecured external debt obligations of the issuer. The ratings mirror the Government of Korea's issuer rating of Aa2 with a stable outlook. Moody's Ratings Service emphasizes that the credit profile of Korea is underpinned by a diverse and competitive economy, as well as a track record of policy effectiveness.

Key Takeaways:

  • Moody's has assigned Aa2 senior unsecured ratings to the Government of Korea's Euro-denominated notes with prospective maturities of 3-7 years.
  • The bonds will constitute direct, unconditional, and unsubordinated external obligations of the Government of Korea and rank pari passu with all current and future senior unsecured external debt obligations.
  • The ratings mirror the Government of Korea's issuer rating of Aa2 with a stable outlook, reflecting a diverse and competitive economy, policy effectiveness, and ongoing challenges from an aging population and high levels of household debt.
  • Real GDP growth has steadily decelerated over the course of 2024, averaging 2% for the full year, and is expected to trend even lower in 2025 due to a fading semiconductor cycle and a more high-tariff environment.
  • The passage of further supplementary budgets is expected to result in a widening deficit from the current budget projection of 3.2% of GDP for 2025, but the debt burden is expected to remain around 50% of GDP through 2028.
  • The stable outlook reflects balanced risks to Korea's credit profile, including fluctuations in key credit metrics and the government's institutional capacity to implement structural reforms.
  • Korea's ESG credit impact score is Positive, reflecting a strong governance profile and robust track record in responding to shocks, despite exposure to social risks from aging demographics and income inequality.
  • The government is pursuing measures to control air pollution, including tighter emissions standards for power generation, industry, and transportation, and has made significant progress in adopting green technology.

Statistics:

  • Aa2 senior unsecured ratings assigned to the Government of Korea's Euro-denominated notes
  • 3-7 years: prospective maturity for the Euro-denominated notes
  • Aa2: Government of Korea's issuer rating with a stable outlook
  • 2%: average real GDP growth rate for 2024
  • 3.2%: expected deficit as a percentage of GDP for 2025
  • 50%: expected debt burden as a percentage of GDP through 2028
  • Positive: Korea's ESG credit impact score
  • CIS-1: Korea's ESG credit impact score category
  • E-2: Korea's environmental issuer profile score
  • S-2: Korea's social risk exposure score

Sources:

  • Moody's Ratings (Moody's)
  • Government of Korea's Euro-denominated notes terms and conditions
  • Sovereigns methodology published in November 2022