Moody’s sees stable outlook for Korea sovereign ratings

Moody's Investors Service is maintaining the stable outlook for Korea's A2 local and foreign currency government bond ratings.
"The stable ratings outlook is premised on the ability of the authorities to manage the country's vulnerability to the global financial market crisis and avoid a deep and sustained deterioration in relative credit metrics,” said Tom Byrne, a Senior Vice President and Asia-Middle East Regional Credit Officer with Moody's Sovereign Risk Group.
"The ratings are supported by Korea's high economic resiliency but are tempered by a mid-range, rather than low, susceptibility to event risk," added Byrne.
"Additional support comes from the economic and financial restructuring of the past decade and the accompaniment of a prudent fiscal stance and relatively strong government balance sheet," Byrne said.
Moody's believes that although risks are present and the Korean banking system has relatively high vulnerabilities to the global credit crisis, Korea is much better positioned to weather the current crisis than that of 1997.
"While there is severe pressure on the ability of Korean banks, as there are in other banking systems globally, to roll over their external funding requirements, our assessment is that the government still has the resources to provide dollar liquidity to domestic banks, despite an ebbing in the BOK's foreign exchange assets from an historical high of $264 bln earlier this year," Byrne said.
"At the same time, the unprecedented turmoil in the global financial system makes seeing through this exceptional crisis, let alone the expected downturn in the economic cycle, very difficult," he added.