S&P upgrades Korea’s credit rating to AA

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S&P upgrades Korea’s credit rating to AA

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Standard and Poor’s (S&P), one of the world’s top credit ratings agencies, upgraded Korea’s sovereign credit rating to a record high of AA from AA- Monday.

AA is the third highest credit rating and Korea now ranks with Great Britain, France and Belgium. There are only six regions that are ranked higher than Korea: Germany, Canada, Australia, the United States, Singapore and Hong Kong.

“Korea’s superior track record of steady economic growth has generated a prosperous economy, greater fiscal and monetary flexibility, and continual improvements in external metrics,” S&P said in a press release on Monday. “The stable outlook on the long-term rating reflects our expectations that geopolitical risk on the Korean peninsula will not escalate beyond what we have observed since the last North Korean leadership transition in 2011.”

This is the second time in 10 months that the credit ratings agency upgraded Korea’s rating. In September, S&P raised Korea’s rating by one notch from A+ to AA-.

S&P’s ratings for Korea started off with A+ in 1988 but fell to B+ in December 1997, when Korea was hit by the Asian financial crisis. Since then, or over 18 years, Korea’s rating has risen by 11 notches.

“It is very meaningful that S&P upgraded Korea’s rating even though the agency has been downgrading both developed and emerging countries around the world,” said Choi Jin-young, a director at Ministry of Strategy and Finance. “We are also widening the gap with neighboring China and Japan.”

In fact, China received an AA- rating in March, and Japan received A+ last September, or two grades lower than Korea’s current rating.

The Finance Ministry said it was exceptional for S&P to raise the credit rating without changing its outlook on economic growth for Korea beforehand.

S&P expressed positive views on the Korean economy in general in its press release.

“We project Korea’s average GDP per capita to rise above $30,000 in 2019, from approximately $27,000 in 2016,” the agency said. “We estimate the trend rate of real per capita GDP growth at 2.6 percent, higher than the typical 0.3 percent to 1.5 percent range we observe in most high-income countries.”

The ratings agency also expressed concerns about Korea’s future economic situation but said the negative factors that Korea faces would have limited impacts on the agency’s ratings at least for two years.

“The chief weaknesses in Korea’s credit fundamentals remain contingent liabilities and geopolitical risks,” S&P added.

Last December, Moody’s gave Korea ranking of Aa2, which is equivalent to S&P’s AA. Fitch is the only major credit ratings agency that gives Korea an AA- grade.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]

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