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South Korea: Moody's Says Geopolitical Risk For Korea Broadens

2017/05/03

Moody's Investors Service said the escalation of tensions between the North Korean regime and the new US government broadens the nature of geopolitical risk for South Korea, which is the majority salient event risk for the sovereign and a constraint on the rating.

A further sustained escalation of tensions would affect Korea's economic and fiscal strength negatively.

The rating agency cautioned that slower increase in investment and consumption would weigh on in general increase and could necessitate larger fiscal stimulus measures.

However, Moody's observed that completed episodes of rising tensions have not deterred investment or consumption in Korea and have not unsettled its financial markets.

In the current episode, spending decisions will be largely unaffected, Moody's said.

The agency forecasts GDP increase at 2.5 % this year and 2.0 % in 2018, which is in line with the rating agency's assessment that Korea's Economic Strength is 'Very High'.

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