Korea’s Sovereign Credit Rating Maintains ‘A- Stable’

John Chambers, chairman of the sovereign credit ratings committee at Standard & Poors (S&P), a global credit rating agency in New York, said on Jan. 17 in an email interview with Dong-a Ilbo, “We think President-elect Roh will maintain the basic economic and diplomatic policies of the Kim Dae-jung government. The current Korean policies are well combined with the global trend regarding trade and capital market.”

The remark is noteworthy because it came amid different assessments over the policies of the new government.

In relation to Korea’s credit rating of which prospects vary, he said, “Korea will maintain ‘A- stable’. Here it means the credit rating could be up or down.”

“Only 18% of the countries with such rating were upgraded in the subsequent rating for the last 10 years,” he added.

Even the same sovereign credit ratings are differentiated from positive to stable and to negative. “If a country expects an upgrade, it should pass a stage of positive,” he added.

Regarding the influence of the military threat on the credit rating, Chambers said, “In fact, Korea and Israel are faced with outside military threats. But in case of Israel, it faces Intifada and its deficits are aggravating.” Currently, Israel’s sovereign credit rating is ‘A- negative.’

The sovereign credit ratings are determined by 10 factors. According to the recent data of S&P and Salomon Smith Barney (SSB), Korea is ahead of other A level countries in terms of all areas such as economic prospects, financial soundness, sovereign debt and foreign currency reserves, with an exception of political stability including wars and a domestic conflict.

Yong-Ki Kim ykim@donga.com