Korea`s Credit Rating Left Unchanged Despite North Korea’s Nuke Issue

John Chambers, executive director of Standard & Poor’s (S & P) John Chambers, one of the world’s top 3 credit rating companies, said on Jan. 14, “Chances are slim that a war will break out on the Korean Peninsular and the U.S. will launch a preemptive attack on nuclear facilities in North Korea.” Against this backdrop, the S & P’s executive director made it clear, “The Korea’s long-tern sovereign credit rating will remain unchanged, maintaining the current A- rating (the 7th highest rating).”

“Marinating Korea’s current sovereign credit rating is the official position of the S&P,” he added in an e-mail interview with the Donga daily newspaper conducted Jan 14. John Chambers is a general director in charge of grading Asian countries` credit ratings and at the same time, deputy director in charge of grading credit ratings of countries around the world. Right after the e-mail interview, Mr. Chambers reaffirmed the S&P`s position in a call conference with investors from other foreign countries and hinted, “The S&P may upgrade Korea’s sovereign credit rating soon or later.”

Chae Jung-tae, director of S&P liaison office in Korea, also explained, “Taking positions of both the U.S. and the North into account carefully, it is difficult to conclude that the two sides may have any intentions of attacking each other, using military forces. Therefore, we have concluded that there may not be any possible military collision between the two countries.”

“Although the recent nuclear standoff between the U.S. and North Korea will escalate tensions on the Korean Peninsular and squeeze investors’ sentiment in a short-term, it may not affect the Korea`s long-term foreign payments,” he added.

The international credit rating company evaluates each country`s credit rating by analyzing ten aspects, such as political stability, growth potential and economic structure, financial and monetary soundness and foreign position (domestic and foreign debts and foreign exchange reserves). In particular, political stability acts an important factor in determining credit rating of a country with territorial division such as South Korea and of developing countries because it has a direct impact on those countries` foreign payments.

“As long as Korea’s political stability is concerned, most important key factor is not the possibility of a war on the Korean Peninsular, but financial burden that South Korea may shoulder in the event of economic collapse in the North regime,” he said.

Yong-Ki Kim ykim@donga.com