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(LEAD) Moody's maintains S. Korea's credit rating at Aa2

All Headlines 17:51 July 05, 2017

(ATTN: CORRECTS figure in 2nd para)

SEJONG, July 5 (Yonhap) -- Global rating agency Moody's Investors Service on Tuesday reaffirmed its rating on South Korea at a record high of Aa2, with its rating outlook also remaining stable.

It also revised South Korea's 2017 growth forecast up by 0.3 percentage point to 2.8 percent on the back of a clear economic recovery in the first quarter. The country's gross domestic product (GDP) rose 2.9 percent in the January-March period, up from 2.4 percent growth tallied a quarter earlier.

"The government of Korea's Aa2 rating reflects Korea's 'Very High' economic strength, 'Very High (+)' institutional strength, 'Very High' fiscal strength, and 'Moderate (-)' susceptibility to event risks stemming from North Korean military provocations and regime instability," said the agency. "The stable rating outlook reflects our view that Korea's credit strengths and challenges are balanced."

Also, Moody's said South Korea is expected to pull off high economic growth over the long term, outpacing other developed countries.

"Looking ahead, actual and potential GDP growth will be lower than they have been in past decades," said the agency. "However, projected growth rates of 2 percent to 3 percent over the next five years compare favorably with growth rates of many other advanced economies. We expect Korea to post the fourth-highest average growth rate among highly rated advanced economies for the period 2011-20."

But it noted that Asia's fourth-largest economy is facing some downside risks at home and abroad. A possible slowdown in ongoing structural reform and a deterioration in government finances will likely drag down the country's long-term growth, while heightening geopolitical risks such as North Korea's provocations may lead to an outbreak of military conflict on the Korean Peninsula.

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 only six other countries out of the Group of 20 advanced and developing nations currently holding the rating.

brk@yna.co.kr
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