Geopolitical risks have limited impact on South Korean economy

Seoul, Feb 16 (IANS) Global credit rating companies have assessed that recent surge in geopolitical risks on the Korean peninsula, caused by North Korea’s nuclear test and rocket launch, will have a limited, temporary impact on South Korea’s economy.

Despite Pyongyang’s fourth nuclear test on January 6 and a long-range rocket launch on February 7, Seoul’s sovereign rating will be affected temporarily and limitedly, Xinhua quoted Seoul’s finance ministry as saying on Tuesday in a statement citing recent credit reports from Moody’s, Standard & Poor’s and Fitch.

Geopolitical risks will have a limited effect on South Korea’s economy and financial markets, the credit companies said, keeping the country’s sovereign rating outlook at stable.

Moody’s on Saturday said the shutdown of an inter-Korean factory park in North Korea’s border city of Kaesong raised geopolitical risks more or less, but it noted that those risks were not much different from past tensions and that the South Korean economy can afford it.

The rating appraiser said it had no immediate plans to modify its credit rating for South Korea, citing the country’s strong economic fundamentals.

As part of its own punitive measures toward North Korea’s recent provocations, South Korea decided last Wednesday to stop operations at the Kaesong Industrial Zone.

Pyongyang responded a day later by shutting down the last symbol of inter-Korean economic cooperation, expelling all of South Korean workers from there and freezing assets in Kaesong, while cutting off major communication hotlines between the two sides.

Fitch in a report said recent developments do not affect its fundamental analysis on South Korea’s AA minus sovereign rating, predicting a very low possibility for armed conflicts occurring between the two sides.

S&P said that it already factored geopolitical risks on the peninsula into its rating of South Korean credit profile, expecting that Pyongyang’s recent nuclear test and long-range rocket launch can have a temporary impact on South Korea’s financial markets and economic activities.

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