Good News in Crisis

On December 20, Deputy Prime Minister Choi Kyung-hwan  held a press conference on Moody’s sovereign credit rating adjustment for Korea.
On December 20, Deputy Prime Minister Choi Kyung-hwan held a press conference on Moody’s sovereign credit rating adjustment for Korea.

 

Moody’s adjusted its sovereign credit rating for Korea to Aa2, the highest ever for Korea, on Dec. 19.

Under the circumstances, some economists predict that at least some funds flowing out of emerging economies can come back to Korea as they did in May 2013, when former Federal Reserve Chairman Ben Bernanke mentioned tapering. Still, the others point out that it should not be forgotten that Korea’s credit rating given by S&P was adjusted upward immediately before the IMF bailout in the late 1990s.

“The upward adjustment by Moody’s at this time is likely to function as a protective barrier against mounting global economic uncertainties such as the consequences of the interest rate hike by the Fed,” said Deputy Prime Minister Choi Kyung-hwan said on Dec. 20, adding, “Nevertheless, the credit rating can fall at any time if we are lax in restructuring and the pending bills regarding the issue should pass the National Assembly without any further delay.”

The upward adjustment is highly meaningful in that most other countries have moved in the opposite direction since the beginning of the second half of this year. For example, Fitch and S&P lowered Japan’s rating by a notch in April and September, respectively. Moody’s lowered France’s by one notch in September, too. At present, Brazil’s rating is BB+ for each of S&P and Fitch.

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