Increasing risks on the Korean peninsula: S&P
There is no immediate impact on South Korea's ratings despite increasing security risks on the Korean pininsula following the death of North Korea's leader Kim Jong-Il, according to a rating agency.
Standard & Poor's Ratings Services said today that the event has raised security risks on the Korean peninsula and could have negative rating implications if these risks increase.
It said in a statement that "Our ratings on South Korea take into account temporary uncertainties associated with North Korean security risks as well contingent liabilities arising from a possible reunification of the North and South. Consequently, while Kim Jong-Il's death has raised uncertainties markedly on the Korean peninsula, we believe that South Korea's sovereign creditworthiness would remain little changed if a smooth North Korean leadership succession takes place. However, security risks and political stability in North Korea could deteriorate rapidly if political succession is not smooth. South Korea could experience adverse security and financial implications as a result. If sufficiently serious, the creditworthiness of South Korea could be negatively affected."
S&P assumes that North Korea's succession, reportedly beginning in 2009, is proceeding as planned.
"Current uncertainties are likely to ease if the succession plan is smoothly implemented. Indications that this assumption is untrue or other signs of political instability developing in North Korea could lead us to revise the sovereign ratings or the outlook on the long-term ratings on South Korea," it noted.
