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Moody's keeps its rating on South Korea at Aa2

According to Yonhap News,

SEJONG, May 12 (Yonhap) -- Global rating agency Moody's Investors Service said Tuesday that it is maintaining its rating on South Korea at "Aa2" with a stable rating outlook.

Moody's rating for Asia's fourth-largest economy has been Aa2, the third-highest level on the company's table, since 2015, when it upgraded it from Aa3.

"The drivers behind the rating affirmation and stable outlook include Moody's assessment of Korea's strong governance and effective macroeconomic, fiscal and monetary management of shocks, as illustrated during the coronavirus outbreak," the ratings agency said in a statement.

"Moody's expects Korea to maintain robust growth potential and strong fiscal and debt metrics relative to similarly rated sovereigns, through the current and potential future shocks," it said.

South Korea's export-reliant economy is expected to take a significant hit from the coronavirus pandemic, as lockdown measures have crippled global supply chains and ravaged demand.

However, Moody's said coronavirus shocks on the Korean economy will be contained.

"The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price volatility are creating a severe and extensive credit shock across many sectors, regions and markets," Moody's said.

"For Korea, the main channels of exposure stem from its reliance on export-oriented manufacturing, its participation in regionally dispersed supply chains and the consequent spillovers to domestic consumption and investment," it said.

"However, Moody's expects that the damage to the economy will be contained and the government's fiscal and debt position will not weaken materially when compared to similarly-rated sovereigns.

The International Monetary Fund (IMF) has predicted that South Korea's economy will shrink 1.2 percent this year, as the global economy is expected to hit its worst year since the Great Depression due to the pandemic.

The world economy is expected to contract 3 percent this year, the IMF said.

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Source: Yonhap News (May 12, 2020)

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