Credit ratings firm Moody's in a report Monday painted a rosy picture of Korea's economic future. Moody's said Korea's economic fundamentals remain strong and forecast the country's GDP growth at 3.8 percent this year and next year.
In addition to classifying sovereign credit ratings, Moody's began last year to analyze issues affecting specific countries, and this is the first time it has focused on Korea.
Thanks to improved export competitiveness, Moody's said Korea's economy entered a recovery phase in 2012. "Sustained rapid growth and economic success is a rare phenomenon in the post-World War II world order," it said. "With structural reform of the housing mortgage market, a prudent fiscal policy framework, and continued competitiveness and innovation in the private sector, Korea will likely continue on its 'breakout' growth trajectory."
It also noted that Korea's growing foreign exchange reserves bolstered the country's ability to deal with external shocks like the 2008 global financial crisis.
But it noted structural problems such as a declining population that could hinder economic vitality. But if the country succeeds in stimulating its service sector through deregulation and promotes increased economic participation by women, it could catch up with Japan and France in per-capita income in purchasing-power terms by 2018, the firm said.
The key to Korea's economic success lies in its ability to resolve massive public and private-sector debt, Moody's added.