Moody’s Investors Service has upgraded Korea’s credit rating from A1 to Aa3, while maintaining its stable outlook. The Aa3 and stable ratings are the highest rating the country has ever received. The rating upgrade was announced on August 27.
Today’s upgrade is the second consecutive improvement in four months. Moody’s upgraded its outlook on Korea from stable to positive, while maintaining Korea’s rating at A1 in April.
The rating agency’s reasons for the upgrade included: ‘strong fiscal fundamentals’, ‘a high degree of economic resilience and competitiveness’, ‘reduced external vulnerability of the banking sector’, and ‘continuation of status-quo in North-South geopolitics’.
Moody’s also stated that ‘a further reduction of the banking sector’s vulnerability to external funding’, ‘a reduction in contingent risks to the government’s balance sheet, which result from non-financial public enterprise debt, or from household debt’, and ‘maintenance of fundamental economic competitiveness and of long-term growth prospects’ could lead to another rating upgrade in the future.
Korean government’s economic management, including the dealing of crises, has been positively evaluated by external, objective viewpoints.
Considering that there have not been any credit upgrades for countries with A or AA levels in 2012, the Moody’s upgrade of Korea’s rating is exceptional and expected to have a positive influence on the evaluations of the country by other credit rating companies.
There is a large difference between A1 and Aa3 because Aa3 is classified the AA level, while A1 is classified only the A level. The AA level ratings are given to highly credible countries.
Due to the upgrade, positive influences, such as an improvement of funding conditions for local financial institutions and enterprises, the improved rating of those institutions and enterprises, and an increase of foreign investor sentiment, can be expected.
* Source :
Ministry of Strategy and Finance and Korea Development Institute: Press Release (Date: 27-08-2012)
