Home  Corporate Affairs Moody's Views on South Korean Developments and Ratings
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Moody's Views on South Korean Developments and Ratings |
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Moody's Sovereign Risk Group has given South Korea one of its highest sovereign debt ratings, A3, and doesn't foresee lowering that rating anytime in the immediate future. This good news was delivered by Thomas J. Byrne, vice president and senior credit officer, Moody's Financial Institutions and Sovereign Risk Group, during a Business Roundtable luncheon. Byrne explained that his company's assessment, which places Korea's ability to repay its borrowing as one of the highest in the developing world, is based on the country's strong fundamentals. Currently, good governance and regulatory regimes, a dynamic export sector, low levels of public debt and high levels of foreign direct investment (FDI) all make South Korea a good risk for lenders and bond buyers, he said. However, long term concerns could slow growth and throw public balance sheets out of order, putting downward pressure on Moody's rating. Economic success and globalization have created backlashes in Korea. On the cautionary side, he noted that anti-business sentiment, growth-retarding government policies and negative feelings about foreign companies doing business in Korea have been on the rise recently. Taken too far, he said, these trends might slow rates of FDI. Similarly, North Korea represents a unique "contingent liability" for South Korea. Should engagement between the two be ramped up, or the DPRK's economy falter, the percentage of South Korea's budget allocated for aid to the North could jump from the current level of .03 percent to 5 percent, stretching the ROK's finances.
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