Moody’s Investors Service on Wednesday reaffirmed South Korea’s sovereign debt rating at Aa2 with a stable outlook, the second show of confidence from a global rating agency this month amid escalated geopolitical risks from North Korean nuclear and missile threat.
Moody’s has kept South Korea’s rating at the third highest on its scale since its last upgrade in December 2015.
"Korea`s credit profile is supported by the country`s very high economic strength, which is reflected in relatively robust growth and high competitiveness," Moody’s said in its latest report. "A very strong institutional framework also underpins the rating, bolstering resilience to potential economic and financial stability risks."
The main Korean composite stock price index closed on Wednesday down 1.46 points at 2,482.91. The benchmark three-year government bond yield closed 1.2 basis points down at 1.935. The won rose 1.50 to 1,131.00 against the U.S. dollar.
The agency added South Korea would report growth rates of 2 to 3 percent over the next five years with the help of its high competitiveness related to innovative growth, but at the same time it considered the country’s graying society, corporate restructuring and high household debt to be risk factors for future growth.
It added heightened tensions from North Korean provocations weighed over the outlook for further upgrade, but was skeptical of the conflict leading to military clash.
"Uncertainty over the potential for military conflict on the Korean Peninsula is rising with the increasingly strident rhetoric. A military confrontation would have significant negative credit implications," it said.
"We continue to assume that the extraordinarily high cost for Korea of any sort of attack by the U.S., both in terms of human lives and in economic terms, will serve as a very strong deterrent to a military confrontation."
Last week, Fitch Ratings also reaffirmed South Korea’s sovereign debt rating at AA- with a stable outlook.
By Cho Si-young and Lee Ha-yeon
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Source: Pulse by Maeil Business News Korea (Oct. 18, 2017)