S&P upgrades South Korea, sees average GDP above US$29,000 in 2014

SINGAPORE - Standard & Poor's has revised the outlook on its 'A+' long-term foreign currency sovereign rating on South Korea to positive from stable. S&P also affirmed its 'A+/A-1' foreign currency and 'AA-/A-1+' local currency credit ratings, and said the outlook on the long-term local currency rating remains stable. S&P’s transfer and convertibility (T&C) assessment remains 'AA'.

S&P said its ratings on Korea reflect its favourable policy environment, sound fiscal position, and net external creditor position. “Significant security risks and contingent liabilities offset these strengths.”

The agency said Korea's economic performance of recent years has been stronger than that of economies at similar income levels, and this had augmented sovereign credit support. “We estimate trend growth of the country's real per capita GDP to be 3%,” S&P said.

“Growth in the past five years or so reflected mainly stronger external demand for Korean exports. The Korean economy, with average GDP expected to rise above US$29,000 in 2014, remains well-diversified and is not dependent on a particular industry or export market.

“In our opinion, the chief weaknesses in Korea's credit fundamentals are contingent liabilities and geopolitical risks on the Korean peninsula. Korea faces the prospects of bearing the uncertain, but likely heavy, costs of a reunification if the North Korean regime fails. Heightened public perceptions of the risks of an inter-Korean military conflict have also generated temporary volatility in Korea's economy and financial system.”
www.standardandpoors.com (ATI).