S&P affirms credit rating on S. Korea

Global credit ratings agency Standard & Poor's said Wednesday it has affirmed its sovereign credit rating for South Korea, citing the nation's fiscal soundness and its net external creditor position.

According to an e-mailed statement, S&P said that it has decided to maintain the credit rating on South Korea at "A," the sixth-highest level, and also maintained the country's credit outlook at "stable."

The decision is based on the results of the agency's annual meeting in October with South Korean policymakers, where they discussed the nation's latest fiscal and economic situations.

"The sovereign credit ratings on the Republic of Korea reflect an intermediate political and economic profile as well as a very strong flexibility and performance profile," S&P said.

"Korea's favorable policy environment, sound fiscal position, and a net external creditor position lend support to the government's creditworthiness," it added.

In particular, the agency cited Korea's "healthy" fiscal position, which it said strongly supports its creditworthiness.

Korea is also a modest external creditor, estimated at 4 percent of its current account receipts in 2011, it added. 

The move comes after Fitch Ratings, another global credit appraiser, upgraded its rating outlook for South Korea's sovereign debt to "positive" from "stable" in November. Fitch made the upgrade citing Korea's strong external liquidity, improved fiscal health and fast economic recovery.

South Korea has been seen as successfully negotiating the global financial turmoil over the past years by keeping its fiscal status in relatively good shape at a time when many European countries and other advanced nations are faced with ballooning sovereign debt. 

S&P, however, expressed concerns about "geopolitical risks" and "uncertain" but "heavy" costs from possible reunification with North Korea. It noted that the risks have increased over the past few years due to uncertainty related to a possible regime change in the North.

"The stable outlook on the ratings on Korea reflects our expectations that geopolitical tensions will not escalate markedly from current levels," it said. 

"Should this expectation prove to be wrong, or if a smooth political succession in North Korea shows signs of becoming unlikely, negative implications for the credit ratings would be likely," it added.

South Korea's government views S&P's decision to retain its sovereign credit rating will have a "positive" impact by providing a relatively favorable overseas borrowing environment for domestic firms next year when the eurozone debt crisis will likely further dampen financial markets.

(Yonhap News)