S&P upgrades ROK's sovereign rating to 'A-plus'

Updated: 2012-09-14 15:03

(Xinhua)

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SEOUL - Global credit rating appraiser Standard & Poor has upgraded on Friday the sovereign rating on the Republic of Korea (ROK) 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" on August 27 and Fitch upgraded the rating from "A-plus" to "AA-minus" on Sept 6.

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 the Democratic People's Republic of Korea (DPRK) 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 ROK'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 ROK 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.

Meanwhile, credit ratings for four government-related entities (GREs) were upgraded. Ratings for Export-Import Bank of Korea, Korea Housing Finance Corp., Small Business Corp., and Korea Finance Corp. were raised to "A-plus," equal to the one for the sovereign rating. Outlooks on these entities were stable.