S&P; upgrades South Korea’s sovereign rating

September 14th, 2012 - 3:46 pm ICT by IANS  

Seoul, Sep 14 (IANS) Global credit rating appraiser Standard & Poor Friday upgraded the sovereign rating on South Korea by one notch to “A-plus”, just one notch lower than those for China and Japan.

The upgrade came after another rating agency Moody’s revised up the sovereign rating from “A1″ to “Aa3″ Aug 27 and Fitch upgraded the rating from “A-plus” to “AA-minus” on Sep 6, reported Xinhua.

That means all the three major rating agencies upgraded the country’s sovereign rating within three weeks.

The rating agency upgraded the country’s sovereign rating for the first time since July 2005 when it revised up the rating from “A-minus” to “A”.

S&P; cited a smooth leadership change in North Korea as a major factor for the upgrade. “The upgrade reflects our less negative assessment of the geopolitical risks on the Korean peninsula. It follows what we judge to be a smooth change of leadership in the DPRK,” S&P; said in an e-mailed statement.

The rating agency, however, forecast that South Korea’s economic indicators will be relatively weak in the next one to two years due to the global economic slowdown and domestic measures to slow the growth of private sector leverage.

Real GDP growth was estimated at an average of 2.8 percent for the 2012-13 period, lower than the 3.5 percent average over the previous five years.

S&P; said that it could raise the rating if South Korea sustains strong economic performance in the next few years and lifts its per capital GDP to levels more comparable with those of higher rated sovereigns.

The sovereign rating could also be upgraded if the banking system becomes less susceptible to international financial disruptions due to a significantly reduced reliance on external short-term funding.

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