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Moody's retains credit rating on S. Korea at 'Aa3'

Moody's Investors Service said Friday that it has retained its sovereign credit rating on South Korea at "Aa3," citing the country's "strong" fiscal fundamentals and "moderate" debt burden.

The global credit appraiser added that it kept its ratings outlook for Korea at stable, also citing its economic resilience, export competitiveness and stabilized geopolitical risks stemming from North Korea.

"Korea demonstrates strong fiscal fundamentals, as reflected in consistent budget surpluses, a moderate debt burden, one of the lowest gross financing needs of rated sovereigns, and low foreign-currency and external debt," Moody's said in an emailed press release.

"Further supporting Korea's rating are the reduced external vulnerability of the banking sector, the resiliency of the economy to global shocks; the competitiveness of Korea's export industries and the continuation of the status-quo in Korean peninsula geopolitics," the agency added.

The move came after Standard & Poor's and Fitch Ratings maintained their sovereign ratings for South Korea in September.

Moody's has kept its current rating on Korea at Aa3, its fourth-highest rating level, since August 2012.

Moody's, however, still expressed caution over public and household debt problems confronting South Korea.

"There are two prominent rating constraints. The first is the sharp rise in public sector, non-financial corporation debt since the global financial crisis," the agency said.

"The second is relatively elevated household debt, which magnifies the vulnerability of consumption expenditure and economic growth to an interest rate shock," it noted.

The agency, meanwhile, singled out a "lax fiscal discipline" that results in weighing on the government's budget, a "fraying of the overall policy framework," which has been helping the country's employment and economic growth, and possibly "heightened geopolitical risks" from the North as potential factors that could lead to a negative rating going forward on South Korea. (Yonhap News)

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