S&P Global Ratings announced on Monday it raised South Korea’s sovereign rating to “AA” from “AA-” with a “stable” long-term outlook, citing steady growth of the economy, improving external financial conditions and sufficient fiscal and monetary policy efforts.
“The upgrade reflects our assessment that South Korea’s strong record of steady growth has generated a prosperous economy, greater fiscal and monetary flexibility, and continual improvements in external metrics,” Yonhap quoted the S&P report as saying.
“Although South Korea’s gross domestic product growth in the next three to five years will be slower than its growth before the 2008 global financial crisis, we believe its prospects are superior to those of most developed economies.”
The latest upgrade in South Korea’s sovereign rating makes the country the most credible among East Asian economies compared to China and Japan. China was given a negative AA-, and Japan got an A+.
The upgrade has been made in just 11 months since S&P, one of three major international credit rating agencies, lifted South Korea’s credit rating level to a stable AA- from a positive A+ last September.
An AA level is the third highest among 21 rating levels by the agency, and it puts South Korea in the same rating group with Britain and France. It is more encouraging that South Korea was given a better outlook than the two European economies with “negative” outlooks.
Other Appraisals
South Korea was given ‘Aa2’ by Moody’s last December, an equivalent level to S&P’s AA. Fitch gave the country AA-. All three credit appraisers have granted South Korea higher ratings than China and Japan.
“It is a highly surprising decision by S&P, considering that the agency has been downgrading sovereign ratings of major economies these days,” said the finance ministry in a statement.
S&P adjusted its outlook for Australia from ‘stable’ to “negative” in July. It lowered Britain’s level by two notches from AAA to AA in June after the referendum to leave the European Union.
“It is also an unprecedented announcement, because in normal cases, an adjustment in the country outlook precedes a change in the credit rating,” the ministry said.
Meanwhile, S&P projects South Korea’s average GDP per capita to rise above $30,000 in 2019, from approximately $27,000 in 2016, growing by 2.6% annually, higher than the typical 0.3% to 1.5% range in most high-income countries.
