Global rating agency Moody’s Investors Service said Monday that the ouster of South Korean President Geun-hye is a credit positive for the country’s sovereign rating as it expects a new president to focus on formulating policies that address Seoul’s structural economic challenges.
“The election of a new president could provide fresh impetus for reform, although success in implementing policies will depend partly on the size of the parliamentary majority,” associate analyst Shirin Mohammadi and Vice President Steffen Dyck said in a report.
The assessment came three days after South Korea’s Constitutional Court unanimously upheld Park’s impeachment over a corruption scandal.
Last month, Moody’s kept its rating on South Korea at a record high of Aa2, with a stable rating outlook. Aa2 is the third-highest rating on the credit table, with only six other countries out of the Group of 20 advanced and developing nations currently holding that rating.
Moody’s Investors Service said there is a number of domestic and external challenges to growth in South Korea, though it said it continues to forecast South Korea’s growth of 2.5 percent in 2017.
“Ongoing corporate restructuring and elevated household debt will continue to constrain domestic demand,” Moody’s report said. “And growing tensions with China over the anticipated deployment of a missile defense system, along with possible shifts in U.S. trade policies, threaten to present further headwinds to growth.”
China has taken a series of thinly veiled retaliations against some South Korean companies over the planned deployment of the advanced U.S. missile defense system on the Korean Peninsula.
China has repeatedly expressed opposition against the U.S. missile defense system out of concerns that the deployment could hurt its security interests.
Seoul and Washington have dismissed such concerns, saying the U.S. missile shield is defensive in nature and focuses on North Korea’s missile activities. (Yonhap)