Pitch, Updated the Korea’s Rating by 2 Notches

One of World top three rating companies, Pitch updated the Korea’s credit rating to ‘A’ increased by two steps on June 27. Accordingly, the Korea’s credit rating of Pitch is close to ‘AA-’, which was the rating just before the financial crisis.

At that day, ‘A’ of Pitch is one step higher than ‘A3’ of Moody’s that evaluated with the highest rating for Korea. Moody’s updated the credit rating from ‘Baa2’ to ‘A3’ at the end of March.

Kim, Yong-deok, official of the Minister of Finance & Economy mentioned, “As Pitch updated the Korea’s credit rating to ‘A’, the Korea’s rating moved into ‘A’ both nominally and virtually.

“S&P which updated the Korea’s credit rating from ‘BBB’ to ‘BBB+’ increased one step probably will adjust the rating upward” forecasted he.

Pitch updated the Korea’s rating owing to following cases △Good results of Korea’s macro-economy △ Foreign exchange reserve and Current Account profits △ Strengthening soundness and competitiveness of companies and banking through restructuring △ Increase on the possibility of additional public flows and sound finance.

Pitch evaluated that the recent household’s debts of Korea have contributed to the economic growth through domestic consumption and don’t work as the cause of structural risk in the financial section. Pitch also added that Korea must decrease the company’s debts and go ahead with bank privatization to update the credit rating.

International financial market determined the interest rate through considering the rating results of over two ratings companies. Accordingly, It is forecasted that the interest on foreign borrowing will be lower through the increase of the rating for Korean companies. When the rating is higher by one notch, the interest on foreign borrowing decreases by 0.35% and so the amounts of KRW 0.5 billion will decrease per year.

Joong-Hyun Park sanjuck@donga.com