S&P reaffirms nation’s A+ rating and outlook (South Korea)

JoongAng Daily ^ | 09/25/2013 | Song Su-hyun

[TexGrill]

International rating agencies have reaffirmed Korea’s stable credit level, despite lingering external uncertainties like the timing of asset-purchase tapering by the U.S. Federal Reserve.

Standard & Poor’s, one of three credit rating agencies, announced yesterday it will keep the country’s A+ credit level with “stable” outlook, owing to favorable government policies and sound fiscal health.

“We are affirming the foreign currency and local currency credit ratings at ‘A+/A-1’ and ‘AA-/A-1+,’ respectively,” the agency said in a report. “Our ratings on Korea reflect its favorable policy environment, sound fiscal position and net external creditor position.”

S&P assessed the country’s debt level as “modest,” and consistent current account surpluses allow policy makers more flexibility in adverse economic conditions.

“The internationally and actively traded Korean won also helps to mitigate risks arising from the foreign currency indebtedness of the country’s financial sector,” it said.

Fitch, another global agency, reaffirmed Korea’s AA level in late August.

On Fitch’s list, Korea is rated higher that Japan and China. Moody’s ranks Korea at the same Aa3 level as its two neighbors.

S&P, however, cited geopolitical risks and unification-related contingent liabilities as vulnerabilities.

“The chief weaknesses in Korea’s credit fundamentals are contingent liabilities and geopolitical risks on the Korean Peninsula,” the report said. “Korea faces the prospects of bearing the uncertain, but likely heavy, costs of a reunification if the Democratic People’s Republic of Korea regime fails.”

[TexGrill]

Global business tip

[imardmd1]

Watch out! Last time I heard (there in 1984) Korea had (has?) a centrally planned economy.

[TexGrill]

LOL!!! 1984 was a long time ago. Are you making a reference to George Orwell’s book instead?

[imardmd1]

No, I was there in 1984 on business, opening up a new market for our electronic products. The Director of Korea Advanced Institute for Science and Technology (KAIST), an old pal and fellow doctoral candidate, explained the economy to me.

Basically, Private companies manufactured what the central government told them to. The idea was to expand their businesses as fast as possible without a lot of domestic competition. Foreign competition was enough in expanding exports. And so forth. My contacts were set up by central planning, and the meetings were intense and effective.

How well central planning worked for them is obvious. Slaughtering of busineesses by the government, as in the US, was not a factor. In Korea, if you want to be well-off you work. Everyone is industrious.