The Korea Herald


Moody’s: Korea’s credit rating outlook remains stable

By Korea Herald

Published : Dec. 23, 2011 - 16:21

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HONG KONG (Yonhap News) ― Global credit appraiser Moody’s Investors Service said Thursday that the outlook for South Korea’s credit rating remains stable despite the death of North Korean leader Kim Jong-il.

Kim ruled the communist nation for 17 years after inheriting power from his father and died of a heart attack on Saturday. He ruled with an iron fist and pursued nuclear weapons programs during his regime.

Moody’s released a report on South Korea saying geopolitical risks will not constrain the country’s ratings, even after factoring in the death of Kim, due to the South’s high degree of economic and financial strength.

“Kim’s death does raise further uncertainties about the dynastic leadership transition in the North and the stability of the government in Pyongyang, but the robust state of the South Korea-U.S. alliance will continue to provide a strong deterrence to war,” it said.

Kim’s death was announced during a flurry of diplomatic efforts to resume long-stalled talks on ending Pyongyang’s nuclear weapons program. North Korea and the United States had been expected to hold a third round of bilateral nuclear talks in Beijing this week.

The credit appraiser has retained South Korea’s A1 status, or the fifth-highest out of its 21 rating scale since April 2010.

“The report notes that the April 2010 rating upgrade to A1 was prompted by South Korea’s exceptional level of economic resilience and effective policy response to the 2008 global crisis,” it explained.

“Looking at the current situation, economic prospects remain relatively favorable compared with most rating peers and with economies as large as that of (South) Korea.”

Moody’s, however, added that a possible collapse of the North would pose considerable challenges for the South Korea, although it believes the status quo will prevail.

Jong-un, Kim’s youngest son who is in his late 20s, has been groomed to succeed his father as the country’s next leader since last year, when he was named a four-star general and vice chairman of the Central Military Commission of the Workers’ Party.

Whether the transfer of power to the young and inexperienced leader will occur without a power struggle, which would increase the likelihood of unpredictable military actions, or provocation against South Korea has been considered to be a crucial issue to the regional stability.