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S. Korea's credit profile backed by strong fundamentals offsetting geopolitical risks: Moody's

All Headlines 10:49 July 03, 2018

SEJONG, July 3 (Yonhap) -- South Korea's credit profile balances its very strong fundamentals against a high exposure to event risk because of persistent geopolitical tensions on the Korean Peninsula, a global rating agency said Tuesday.

In a report, Moody's Investors Service said South Korea's broad diversification and high level of competitiveness contribute to its strong growth performance when compared with its peers, and a very strong institutional framework bolsters its resilience against potential risks in economic and financial stability.

South Korea's "moderate" susceptibility to event risk is driven by the geopolitical risks -- as indicated -- associated with North Korea, it added.

"In addition to geopolitical risk, primarily in relation to the threat from North Korea, a primary credit challenge is the sovereign's long-term economic and fiscal costs brought on by a rapidly aging population," Moody's said.

Moody's said it would consider upgrading South Korea's sovereign rating if there was a material and irreversible reduction in geopolitical risk and, in particular, a lowering of the threat of war on the Korean Peninsula.

"Further economic and structural reforms that durably improve potential GDP growth and mitigate the adverse impact of an aging population would also be credit positive," the rating agency said.

Last month, Moody's maintained its rating on South Korea at Aa2, citing the country's resilience to global shocks, eased geopolitical risks and sound public finances.

The rating agency also said its outlook for Asia's fourth-largest economy remains stable.

S. Korea's credit profile backed by strong fundamentals offsetting geopolitical risks: Moody's - 1

sam@yna.co.kr
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