South Korea’s next budget plan and economy as a whole got a positive rating from global credit rating agency Moody’s. The agency said it admired the country’s approach to successfully achieving fiscal health while maintaining the momentum of long-term growth next year, when it is set to embark on its biggest fiscal spending push ever.
The positive rating is the result of a formal meeting between Maria Lee, head of external relations at Moody’s, and the senior South Korean officials. Moon Ji-sung, deputy minister at the Ministry of Economy and Finance, and budget coordination deputies were also with the delegation.
In the discussion, the Government of the Republic of Korea shared plans to greatly increase investments in future growth sectors, such as artificial intelligence and three specific mega-projects. Officials told the agency that even as state spending will go up to a record high next year, the managed fiscal balance will be at its healthiest in about 20 years.
The government is introducing a new future response fund with further tax revenues to help maintain this balance. This special fund would provide a source for strategic investments and serve as a safety net to bolster the country’s fiscal strength in the event of economic swings.
South Korea’s highly successful issuance of foreign exchange stabilization bonds this year was also emphasized in the talks. The government sold $3 billion and 1.7 billion euros of bonds, with the success of the sales. Spreads on notes denominated in euros fell sharply from previous record lows, enabling the country to access international financial markets to access critical funds at a much lower cost.
Moody’s’ officials are keen on the continued policies aimed at facilitating global access to South Korea’s capital markets, a policy that is strictly monitored by local regulators such as the Financial Services Commission.
Officials in the end presented in detail the comprehensive changes in the foreign exchange market. These measures are part of the strategic shifts, which are closely linked to the broader monetary policy measures announced by the Bank of Korea, including the reform of the registered foreign institution (RFI) regime. The government also announced a long-term plan to internationalize the currency, or won, which would eventually mean that won would be freely held, traded and sold in international markets.
