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Moody's maintains Korea's credit rating at Aa2

Global rating agency Moody's Investors Service on Wednesday reaffirmed its record-high Aa2 rating for South Korea, with its rating outlook also remaining stable, despite rising tensions over North Korean issues.

"Korea's credit profile is supported by the country's very high economic strength, which is reflected in relatively robust growth and high competitiveness," it said in its latest report. "A very strong institutional framework also underpins the rating, bolstering resilience to potential economic and financial stability risks."


In December in 2015, Moody's upgraded South Korea's credit rating to Aa2 from Aa3, the highest-ever rating the country has received from the agency.

Aa2 is the third-highest rating on the credit worthiness designation, with France, Britain and Hong Kong all on the same rating level.

The agency said South Korea will likely post growth rates of 2-3 percent over the next five years helped by its size, diversity and competitiveness.

But Moody's noted that the recent North Korean provocations will intensify downside pressure on Asia's fourth-largest economy due to a possible hot war or a sudden collapse of the Pyongyang regime.

"Uncertainty over the potential for military conflict on the Korean Peninsula is rising with the increasingly strident rhetoric. A military confrontation would have significant negative credit implications," it said. "We continue to assume that the extraordinarily high cost for Korea of any sort of attack by the U.S., both in terms of human lives and in economic terms, will serve as a very strong deterrent to a military confrontation."

Last week, Fitch also maintained its rating for South Korea at AA1, the fourth-highest grade, with its rating outlook remaining stable, citing a "familiar pattern" of strains sparked by North Korea.


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