Moody's Investor Service on Friday raised South Korea's credit outlook from "stable" to "positive" on improved public debt management by the government.
Despite the outlook upgrade, the global credit appraiser maintained the overall rating at Aa3, the fourth-highest in its rating scheme.
The key drivers for its action are consistent measures taken by Seoul in the past few years to manage the debt of its public corporations, reduced vulnerability to global market turbulence and Seoul's ongoing track record of fiscal prudence, Moody's said.
In debt management, Moody's said recent policy steps taken by the government have gained traction in improving operation efficiency and reducing the burden of state-owned corporations.
On the vulnerability to outside shocks, the agency said the country's macro-prudential regulatory measures have proved effective in reducing corporate and banking sector reliance on external funding, which was not the case in 2008, when the country was rocked by the global financial crisis.
In regards to fiscal prudence, the country's strong position enables a relatively large degree of policy space to cope with both contingent risks and external shocks.
Moody's said it affirmed the country's Aa3 rating because South Korea has shown a demonstrated ability to bounce back from external shocks.
Moody's also said that continued improvement in operation efficiency and robust long-term economic growth prospects, along with the strengthening of the government's financial position, could allow South Korea's ratings to go up in the future.
Related to the latest outlook upgrade, the finance ministry said there is a chance that Moody's will mark up the country's rating by one notch to Aa2 within six to 12 months. Moody's last raised the country's sovereign rating in August 2012.
"In the past, when Moody's raised its outlook, this was followed by a ratings hike in four months," the ministry said.
The ministry claimed the latest action is in response to persistent efforts taken by Seoul to deal with public debt and push forward change that can raise the country's competitiveness. (Yonhap)
