By Kim Jae-kyoung
Staff Reporter


Fitch Ratings Monday raised South Korea’s sovereign credit rating by one notch to `A plus’ from `A,’ citing eased geopolitical risks triggered by North Korea’s nuclear standoff.

Still, the rating of `A plus’ is one notch below `AA minus,’ the level given before the financial crisis hit the country in late 1997.It is the same as Taiwan’s and one notch above China’s.

The U.K.-based global credit ratings agency said that North Korea’s recent agreement to scrap its nuclear weapons program has eased tensions on the Korean Peninsula and paved the way to upgrading its credit rating.

``South Korea’s rating has been constrained by concerns over the threat posed by a nuclear-armed North,’’ said James McCormack, head of Asia Sovereigns at Fitch Ratings.

``These concerns have not been alleviated in full, but the risks have diminished with the focus of the six-party negotiations now shifting from whether North Korea would abandon its weapons program to how and when the program will be abandoned,’’ he added.

In September, North Korea agreed to scrap all its nuclear weapons and rejoin an international non-proliferation regime in exchange for political and economic benefits at the six-party talks held in Beijing, ending the three-year nuclear deadlock.

Fitch pointed out that there may be disputes over implementation of the various commitments, but achieving an agreement in principle at the six-party talks ensures they will remain the forum in which the remaining issues are addressed.

It added that the nation’s credit ratings are also supported by continued prudent public finance management and the country’s strong external position, citing sustainable government surplus and low government’s debt ratio.

Earlier in September, Fitch hinted at a rating upgrade by placing the Korea’s long-term foreign currency `A’ rating on `rating watch positive.’ It kept the credit rating at `A’ with a stable outlook for three straight years since it last raised the rating to `A’ from `BBB plus’ in June 2002.

``Other credit appraisers, such as Moody’s Investors Service, may also upgrade the nation’s sovereign rating if the six-nation talks to be held in November bring about good results,’’ said Deputy Finance-Economy Minister Kwon Tae-shin.

In July, Standard & Poor’s raised Korea’s sovereign credit rating by one notch to `A’ from `A minus,’ setting the ratings outlook at stable. The rating agency cited a stronger banking sector and a flexible monetary stance for the rating upgrade.

U.S.-based Moody’s has kept Korea’s rating at `A3’ since March 2002, when the agency raised the ratings by two notches from `Baa2.’

kjk@koreatimes.co.kr