Fitch Sees Fiscal Room for South Korea During AI Boom
Fitch Ratings indicates South Korea can utilize fiscal policy to mitigate external risks from Middle East conflicts as the AI boom bolsters chip exports. The agency expects government debt to stabilize at 50% of GDP while maintaining a positive outlook on the nation's long-term growth potential.
South Korea can use active fiscal spending to offset Middle East geopolitical risks without damaging its credit profile, according to Fitch Ratings. The country is home to the world's largest chipmakers Samsung Electronics Co Ltd and SK Hynix Inc, which are capturing surging AI-driven semiconductor demand. Fitch director Sagarika Chandra said this AI boom provides a fiscal buffer for increased government expenditure.
This fiscal flexibility allows the country to stabilize the economy while monetary policy remains hawkish to curb inflation. The ratings agency is less concerned about the national debt trajectory in the medium term given South Korea's dominance in the AI supply chain.
