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Fitch more bullish on Korean debt
October 25, 2005 ĪŅ Fitch Ratings raised South Korea's sovereign debt ratings by a notch yesterday, saying that North Korea's agreement in September to abandon its nuclear weapons program has reduced security risks here.
The U.K.-based credit rating agency upgraded the country's long-term foreign currency rating to A+, its fifth-highest rating, from A, putting the nation on a par with Taiwan. Korea's rating with Fitch is one notch above China's and two lower than Japan's.
"South Korea's ratings have been constrained by concerns about threats posed by a nuclear-armed North," said James McCormack, the head of Fitch's Asia ratings team. "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."
Fitch also said South Korea's ratings were "supported by continued prudent public finance management and the country's strong external position." The rating agency forecast that the government would have a budget surplus equal to 2.3 percent of gross domestic product this year. It said it expected strong exports to underpin a continued accumulation of foreign-exchange reserves.
But Fitch said that the nation's recent macroeconomic performance had been "disappointing," adding that this year's growth would be 3.5 percent.
Kwon Tae-shin, a deputy finance minister, said yesterday, "Now, only Moody's Investors Service among the three major credit rating agencies has kept Korea's rating unchanged for the last three years." Standard & Poor's raised the nation's rating in July from A- to A.
"Moody's has been the most conservative regarding the North Korea Nuclear issue," Mr. Kwon said. "It will not move until North Korea agrees on detailed commitments to end its nuclear arms program in the next round of six-party talks in November."