Moody’s holds rating on S. Korea at Aa2 with stable outlook despite virus challenge

2020.05.13 10:58:32 | 2020.05.13 15:36:35

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Moody’s Investors Service on Tuesday affirmed its sovereign debt rating on South Korea at “Aa2” with stable outlook, citing the country’s strong governance during the coronavirus crisis and robust fiscal position.

The global rating agency has kept its rating on Asia`s fourth-largest economy at Aa2, the third-highest level on the company`s table, since 2015. The countries enjoying the same rating are France and the UK.

Korea’s main Kospi finished Wednesday 0.95 percent higher at 1,940.42. The Korean won rose 0.02 percent, or 0.20, against the U.S. dollar to 1,223.80.

The assessment was based on “Korea`s strong governance and effective macroeconomic, fiscal and monetary management of shocks, as illustrated during the coronavirus outbreak,” Moody’s said in a report.

It showed confidence in the country’s executive and policy institutions, saying they have a “track record of effective responses that preserve robust growth potential and sound public finances” that is likely to be maintained in the current and potential future shocks.

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Still, Korea faced a number of risks. “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,” Moody’s said.

But it expected the damage to the Korean economy to be contained and the government`s fiscal and debt position to not weaken materially compared to similarly-rated sovereigns.

Korea’s rapidly aging society was a long-term risk, it noted, but added that for now it poses a similar or less threat to the economy compared with other advanced economies. The stalled peace process between South and North Korea also remains a lingering geopolitical risk.

Other international rating agencies have also maintained sound ratings on Korea, with Fitch Ratings holding its rating at AA- and S&P at AA.

By Kim Hyo-jin

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