* Fitch says risks to South Korea credit rating ease
* Says things in better shape than seen in November
* Upgrades 2009 GDP forecast for South Korea
By Yoo Choonsik
SEOUL, May 19 (Reuters) - Chances of a downgrade to South Korea's credit rating has eased over the past several months in line with improving global credit markets but the outlook remains negative, a senior Fitch Ratings official said on Tuesday.
It has also upgraded its view on Asia's fourth-largest economy for this year on the back of improving indicators from the manufacturing sector but expects only a modest recovery ahead due to a still-struggling U.S. economy, he said.
"The risks that we were most concerned about have alleviated a little bit from where we were," James McCormack, Fitch's head of Asia Pacific sovereign ratings, told Reuters in an interview. The rating agency downgraded last November its outlook on South Korea's A-plus sovereign rating to negative from stable.
But he said he would not be able to say whether or when Fitch would change its view on the country's sovereign ratings until a planned consultation meeting with South Korean financial authorities in early July.
Fitch is the only one of the three major international ratings agencies with a negative outlook on South Korean sovereign ratings, although its current rating is set one notch above those of Standard & Poor's and Moody's.
McCormack said Fitch upgraded last week its forecast for South Korea's economic performance this year to a contraction of about 3 percent from a 5.1 percent decline seen before, but added the outlook remained weak.
"The revision was based on some of the higher-frequency data which we were looking at in terms of the industrial production and the exports side, which weren't as bad as before. But it's still weak," he said.
The revised forecast is still slightly worse than the South Korean central bank's view that the country's economy would contract by 2.4 percent this year, which would mark the worst performance since the 1997-1998 Asian financial crisis.
Growing optimism that the global economy has turned around for a recovery from its worst slump in many decades has set world equities markets on a sharp rally over the past several weeks, but McCormack called for caution.
"The United States has been in recession based in part on balance sheet adjustments in the household sector. Those kinds of adjustments take time," he said. "It's not going to be fully resolved in a quarter or in two quarters." (Editing by Kazunori Takada)