The recent shutdown of Gaeseong industrial park following North Korea’s nuclear test and rocket launch has hurt South Korea’s credit ratings due to higher geopolitical risks, Moody’s Investors Service said Monday.

The Seoul government announced last week the closure of the joint industrial park where 124 South Korean businesses have been operating with North Korean workers in retaliation against Pyongyang’s string of provocations. In response to the unprecedented move, North Korea expelled all remaining workers and froze all assets inside the park, with the losses suffered by companies estimated to reach over 2 trillion won ($1.6 billion).

“The closure of this last remaining symbol of inter-Korean reconciliation is credit negative for the South, as it heightens geopolitical risk,” the global credit rating agency said in a report, noting that its analysis is based on the premise that the status quo would prevail.

Moody’s upgraded South Korea’s credit rating to Aa2 from Aa3 in December last year, the highest-ever rating Asia’s fourth-largest economy has received from the agency.

The Aa2 rating is the third-highest rating given by Moody’s.

The ratings agency pointed out that the mere perception of geopolitical risk “can hurt a country’s capital, current and fiscal accounts, making it harder for it to service its debts ... and can lead to lower foreign direct investment and higher funding costs for the public and private sectors.”

(khnews@heraldcorp.com)