Finance minister out to assure global credit agencies

Finance Minister Yoo Il-ho met with global rating firms in an attempt to assure credit appraisers of the economic situation in the aftermath of former president Park Geun-hye’s impeachment on the eve of a meeting of G-20 finance ministers and central bank governors.

Yoo met Moritz Kraemer, S&P‘s global sovereign chief ratings officer, and James McCormack, head of sovereign ratings at Fitch, separately to address positive signs of a recovery in exports and investment in recent months. The minister told them that the government is committed to taking swift action against major internal and external risks being raised amid the political leadership vacuum, the ministry of finance said.

Ratings officers told the minister that the ouster of former President Park has removed uncertainties for the country but raised concerns over rising household debts, North Korea and the upcoming presidential election. Trade issues between the US and China also remain key risks to the country’s economy, they said.

The rating agencies said they have no plan to change their sovereign ratings on the South Korean economy even after the unprecedented presidential dismissal last week. On March 10, South Korea’s Constitutional Court unanimously upheld Park‘s impeachment over a corruption scandal that had been rocking the country for months.

“The Korean Constitutional Court’s decision to uphold the impeachment of President Park Geun-hye does not have an immediate effect on the sovereign credit rating on the Republic of Korea,” S&P said after the announcement of the impeachment decision on March 10.

S&P graded Asia‘s fourth-largest economy at AA, the third-highest mark on its sovereign credit table, while Fitch gave South Korea AA-, the fourth highest rating.

Moody’s assigned Aa2, the third-highest rating on the credit table, with a stable rating outlook, for South Korea.

All the sovereign ratings for South Korea were given before the scandal began to unfold in October 2016.

Moodys’ Investors Service earlier this week said that the ouster of President Park is a credit positive for the country‘s sovereign rating as it expects a new president to focus on formulating policies that address Seoul’s structural economic challenges.

“The election of a new president could provide fresh impetus for reform, although success in implementing policies will depend partly on the size of the parliamentary majority,” Moody’s said in a report.

The minister was attending the two-day G-20 meeting in Baden-Baden, Germany on Friday.

Representatives were to discuss ways to boost policy coordination as the global economy is facing heightened downside pressure and rising uncertainties stemming from emerging trade protectionism.

By Park Ga-young (gypark@heraldcorp.com)