Worst over for Korean corporates: S&P

People walk down a street in Seoul’s financial district of Yeouido, Sept. 23. Yonhap

Korean companies will face tight credit conditions in 2026, but the worst of the current downturn appears to be behind them, S&P Global Ratings said Wednesday.

The credit appraiser forecast that Korea's GDP growth will recover from 1.1 percent in 2025 to 2.3 percent in 2026, driven by a rebound in semiconductor exports and fiscal support.

Greater clarity in policy direction and somewhat eased tariff burdens were seen as positive factors, though ongoing shifts in U.S. policy and lingering tariff issues will continue to pose challenges.

"Although overall performance this year has been quite weak and challenging, we are seeing signs of a rebound in the second half," Park Jun-hong, credit analyst at S&P Global Ratings, said during a press meeting co-hosted with Nice Credit on Wednesday. "In that sense, I believe we have passed through the worst period."

Nice Credit projected total revenue across 14 major industries will rise 5 percent next year to 1,642 trillion won ($1.15 trillion), up from 1,564 trillion won in 2024.

Still, performance will remain uneven. Semiconductor and shipbuilding sectors are gaining momentum on the back of favorable U.S. policy, while battery makers, chemicals and petrochemicals continue to struggle with weak demand and rising competition from China.

"Tariffs hurt sectors exposed to trade barriers," Park said. "However, there are also areas that stand to benefit from U.S. policy. In areas like semiconductors and shipbuilding, U.S. policy has reduced competitive pressure from Chinese firms, supporting Korean players."

Despite concerns over a potential bubble, the ongoing artificial intelligence (AI) investment cycle is expected to continue expanding. Korea stands to benefit as a major supplier of high bandwidth memory, memory chips and power equipment — core components of AI infrastructure.

"The semiconductor cycle tied to AI investment will eventually enter a downturn," said Song Ki-chong, director of the rating policy division at Nice Credit. "But we expect companies like Nvidia that build AI infrastructure to maintain their leadership for the time being, (providing sustained positive effects on Korea's growth)."

The rebound in exports, coupled with expansionary fiscal policy, has contributed to the upgraded growth outlook for 2026, according to Louis Kuijs, chief Asia-Pacific economist at S&P Global Ratings.

Kuijs also noted that a weaker U.S. dollar is unlikely, making a reversal in the recent won-dollar exchange rate trend improbable. This, combined with concerns over the housing market, will likely delay the Bank of Korea’s rate cuts until the second half of 2026.

"We think that the strength of the U.S. economy and the strength of its capital markets in pulling capital from Northeast Asia is likely to continue," Kuijs said. "We don't expect that the recent losses will be regained."

Lee Hyuk-joon, director of the finance rating division at Nice Credit, echoed this view. "U.S. capital inflows could increase next year, especially with highly anticipated IPOs (initial public offerings) from companies like OpenAI and SpaceX, which could further push up the exchange rate," he said.

Lee also pointed out that the Korea-U.S. interest rate inversion began in 2022 and has persisted for three years, coinciding with the won's prolonged depreciation.

"While the U.S. is expected to cut interest rates at the December monetary policy meeting and continue easing into next year, Korea may find it difficult to do the same," Lee said. "If the rate gap narrows in 2026, it could have a positive impact on the won."