Japanese rating agency ups rating on S. Korea by one notch

SEJONG, Oct. 17 (Yonhap) -- Rating and Investment Information (R&I), a Japanese rating agency, on Wednesday raised South Korea's sovereign rating by one notch, citing the economic recovery, sound fiscal stance and eased North Korea-related tension.

The rating agency, one of Japan's most prominent, upgraded Seoul's rating to "AA-" from the previous "A+," the first raise since 2006, and said its outlook is stable.

R&I said South Korea's economy has shown solid momentum, buoyed by a global economic expansion. While the Moon Jae-in administration plans to utilize fiscal options more actively, the level of outstanding debt is low, and fiscal discipline is of little concern.

"While full attention needs to be paid to the impact on exports from intensifying trade friction between the United States and China, the economy will likely be underpinned by more expansionary fiscal policy with a focus on income distribution equality," R&I said.

To make stable growth in the future, diversifying the sources of growth is needed. Given projected rapid population aging, it is essential to enhance the productivity of the domestic economy, it noted.

R&I said it has some concerns about labor market-related policies but positively views the government's support for small and medium-sized enterprises and focus on innovation, among others.

"Eyes are on future developments to see whether the Moon Jae-in administration's economic policies for income-led growth will pay off," the rating agency said.

Although the North Korea issue has weighed on South Korea's sovereign creditworthiness, the progress of diplomatic negotiations has eased tensions on the Korean Peninsula, it added.

sam@yna.co.kr
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