SEOUL/SEJONG, Dec. 21 (Yonhap) - Moody’s Investor Service’s latest upgrade of South Korea’s credit rating is expected to better insulate the country from a recent U.S. interest rate hike and other external uncertainties, Seoul’s top economic policymaker said Sunday.
In a news conference held in Seoul, Finance Minister Choi Kyung-hwan stressed the global credit appraiser’s decision to give Asia’s fourth largest economy an Aa2 rating is a clear sign of its confidence in the country’s fundamentals.
He also said that Moody’s has given high marks for the country’s ability to push forward critical structural reforms that is key to sustainable growth.
Moody’s marked up South Korea’s sovereign credit rating one notch on Friday from Aa3, the highest-ever rating it has given to the country. It gave the country a “stable” outlook from ”positive.” The Aa2 rating places South Korea on par with France on Moody’s scale and one notch above China.
Moody’s cited South Korea’s strong credit metrics and the country’s very high institutional strength to implement structural reforms.
Choi, who doubles as the country’s deputy prime minister in charge of economic affairs, said that Moody’s move comes at an opportune time and can act as a “protective wall” against increased global volatility following last week’s U.S. rate hike.
“South Korea is the only country that received an upgrade from Moody’s this year,” Choi said. “In the past 3-4 months credit ratings for Japan, France, Saudi Arabia and Brazil have all been marked down.”
Noting Moody’s last upgraded South Korea rating in August 2012,towards the end of the last administration, Choi said this latest change reflects how the appraiser viewed the incumbent Park Geun-hye administration’s economic policies.
The minister said that the government is committed to keeping alive the economic growth momentum that was built up from the third quarter and will push forward key structural reforms in labor, public and financial sector, as well as in education.
Choi also said that failure to implement timely reforms can lead to the country’s credit rating going down again.
“Failure to implement change will not only hurt the national economy, but its international standing,” he stressed. “2015 is a ‘defining year’ and that headway must be made on reforms soon.”
Reform bills have been languishing in parliament.
The finance minister said that while Moody’s has given the country a protective barrier, policymakers will nevertheless be ready to implement contingency plans if there is excess volatility in the market.