[EDITORIALS]Moody's seal of approval

Home > Opinion > Editorials

print dictionary print

[EDITORIALS]Moody's seal of approval

It is very positive news indeed for our country to be given a credit rating raise by Moody's, one of the three major credit agencies in the world. The increase was not by only one notch but by two. And Moody's has been very conservative in rating Korea, so the promotion is doubly good news. Thanks to this development, our firms will be able to save on borrowing costs, and more foreign investment, both direct and through our stock market, is probably on the way. Those effects will eventually inject a lot more life into our economy.

The upgrade by Moody's reflects a positive evaluation of our government's efforts at restructuring and its healthy management of our macroeconomy. But there is still a long way to go to regain full confidence abroad. The new credit rating of A3 by Moody's is still two notches lower than the A1 credit rating that Korea had before the economic crisis in 1997, and Standard & Poor's has said that it has no plans for now to upgrade Korea's credit rating.

The move by Moody's was widely anticipated, and the change has already been factored into the bond and stock markets. The stock market did not move at all after the news.

An A-level credit rating means that the rater believes the rated country has the ability to pay its debts, but that is of course only an opinion, and the economy still has to back it up. So far Korea's economy has regained its strength because the level of outstanding debt is decreasing and the economy is diversifying and proving that it can withstand external shocks.

Not everything is rosy. There are fears that the present recovery is an unsustainable bubble; exports are not rising and domestic consumption is carrying the load of the rebound. Standard & Poor's said that it would not upgrade Korea's credit rating until the banking sector is privatized and restructuring goes further. Those are reasonable demands, and a higher credit rating should not lure us into a false sense of security where we rest on our laurels. To build a base for stable growth, we must continue to restructure the economy and keep a close eye peeled for obstacles such as labor unrest or turmoil in foreign exchange markets.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now