[Market Now] Fitch warns of weakening reform drive

Fitch Ratings, one of the three major global credit appraisers, said Friday that the outlook for Korea’s economic reforms, essential for its long-term growth, has gotten murkier after President Park Geun-hye’s ruling party lost its parliamentary majority in elections.

“The South Korean government will find it more difficult to implement key structural reforms to boost long-term productivity,” said Fitch analyst Thomas Rookmaaker. 

In April 13 general elections, Korea’s governing Saenuri Party suffered a crushing defeat, falling to second place in the National Assembly with 122 of 300 seats.

“This will likely make passage of any potentially contentious legislation, including that pertaining to labor market and services sector reforms, more difficult,” said Rookmaaker.

Fitch, however, said it is keeping South Korea at AA-, the fourth highest on its ratings scale, with a stable outlook, citing robust external finances and generally stable macroeconomic performance as key credit strengths.

By Lee Sun-young (milaya@heraldcorp.com)