S&P affirms South Korea

Standard & Poor's said it affirmed its A/A-1 foreign-currency and A+/A-1 local-currency sovereign credit ratings on the Republic of Korea.

The outlook is stable.

The agency said Korea's credit profile includes two dynamic trends that balance each other out: on one hand, the détente between South and North Korea and progress on the six-party talks lessen the risk of war and the risk of economic collapse in North Korea. South Korea's financial profile also includes some well-established trends, such as a flexible and resilient economy that has grown an average 5.7% a year since 1999 and a government that has maintained an average general government surplus of 1.3% of GDP.

Offsetting these positive trends are the external liabilities of Korea's financial sector, which have increased markedly to a projected $225 billion at year-end 2007 from $67 billion in 2002. If external liabilities continue to increase at this pace, S&P said the sovereign could be in a net external debtor position next year for the first time since the Asian financial crisis.

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