Standard & Poor’s (S&P) forecast that it will be difficult for Korean businesses to recover their credit ratings anytime soon.
On September 3, S&P analyst Han Sang-yoon made that prediction in a report distributed prior to a seminar about a reduction in global liquidity and predictions for Korea's credit rating, presented by S&P analysts.
The analyst said, "The recent credit ratings for Korean companies are lower than those in 2009." He explained that the credit status for the materials industry and the export industry remains under pressure, owing to China's slow growth and a weak yen. The credit ratings for domestic demand and public enterprises are also under pressure on account of a decrease in domestic consumption. And these factors act as downward pressure.
But, Mr. Han added that the pressure can be alleviated with the endeavors of the steel, oil, and chemical industries, and state-owned companies, to reduce spending. Mr. Han also advised global companies such as Samsung Electronics and Hyundai Motors to pursue strategies to avoid the influence of a weak yen. Finally, he endorsed lowering interest rates and easing repayment plans for businesses with loans.
Ritesh Maheshwari, managing director at Standard & Poor's, pointed out, "The potential risks in credit ratings for Korean banks are still high due to a high level of private sector debt," adding, "In the event of worsening economic conditions, including a sluggish economy and a decline in property prices, Korea's credit rating can be downgraded."
According to Standard & Poor's Ratings Services' banking industry country risk assessment (BICRA) scores, industry risk factors for Korea are relatively low, whereas economic risk factors are not. Korea was assigned to BICRA Group 3, along with the US, UK, and France.
The managing director concluded by saying, "However, given slow loan growth and slow economic recovery, Korea's credit outlook for the bank industry is stable at the moment."