S&P: Korea ratings depend on disarmament

Standard & Poor's said the six-party talks pushing for the nuclear disarmament of the Democratic People's Republic of Korea (North Korea) have reportedly reached a tentative agreement that may see North Korea shut down its nuclear reactor in exchange for energy and other economic aid. A meeting is under way that aims to reach a final agreement. Such an agreement may reduce the geopolitical risk that constrains the ratings on the Republic of Korea (foreign-currency A/stable/A-1, local-currency A+/stable/A-1), but clear evidence of North Korea's commitment to nuclear disarmament is a prerequisite to any future positive ratings action.

If a final agreement is reached, it would be a positive step toward reducing the tension on the Korean Peninsula. However, S&P said, uncertainty remains as to the level of commitment of North Korea to fulfill its side of the agreement. Unpredictable North Korea signed a similar agreement to stop its nuclear program in 1994, only to continue to develop nuclear weapons, the agency said.

If there is concrete evidence for progress with disarmament, Korea's sovereign credit ratings could be upgraded, depending on the degree to which geopolitical risks are reduced, S&P said. If the process fails to get underway, S&P's current ratings would be maintained. Korea would then need to make progress in other areas to improve its sovereign ratings - such as structural reforms in the public and SME sectors and in the area of labor relations - and create a more market-orientated style of economic management by reducing the level of government intervention, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.