Standard & Poor's on Friday joined its fellow ratings agencies in upgrading the sovereign ratings on South Korea, citing waning geopolitical threats on the Korean peninsula amid stable political conditions in North Korea.
The foreign- and local-currency long-term credit ratings on the Republic of Korea was lifted to A+/AA- from A/A+ with a 'stable' outlook. The agency also upgraded the local-currency short term rating to A-1+ from A-1 and affirmed its foreign-currency short-term ratings at A-1.
"The upgrade reflects our less negative assessment of the geopolitical risks on the Korean peninsula. It follows what we judge to be a smooth change of leadership in the Democratic People's Republic of Korea," the agency said in a statement.
The stable outlook on the ratings reflected the firm's expectations that the Democratic People's Republic of Korea, or DPRK, will remain politically stable in the next three to five years.
At the same time, the agency raised the ratings on four Korean government-related entities namely, Export-Import Bank of Korea, Small Business Corp., Korea Housing Finance Corp., and Korea Finance Corp. The outlooks on these entities are stable.
S&P forecasts South Korea's economic indicators to be relatively weak in the next one to two years, reflecting the global economic slowdown and domestic measures to slow the growth of private sector leverage. The agency predicts real GDP growth to average 2.8 percent in 2012-2013, below the long-term average of 3.5 percent.
The S&P's rating action follows a similar move from Fitch Ratings on September 6. Fitch upgraded the sovereign's long-term foreign-currency rating on South Korea to 'AA-' from 'A+', reflecting the country's continued economic and financial stability in the volatile global environment.
Last month, Moody's Investors Service upgraded the country's credit rating to Aa3, citing a high degree of economic resilience and strong fiscal fundamentals.
South Korea has recently ramped up efforts to counter a slowdown in economic activity. The Bank of Korea said Thursday that it will inject KRW 1.5 trillion into the country's banks to help them extend cheap loans to small businesses. The announcement came just days after the government unveiled $5.23 billion of stimulus measures to support the economy.
The central bank on Thursday retained the benchmark interest rate unchanged at 3 percent. The central bank has surprised analysts two months ago with a 25-basis point cut in the rate.
by RTT Staff Writer
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