Moody’s Investors Service has maintained South Korea’s credit rating at Aa2, a high quality and low risk rating, according to the Ministry of Strategy and Finance on Wednesday. It also raised the country’s 2017 growth outlook to 2.8 percent from 2.5 percent.

Moody accredited the country’s “very high” assessment based on economy size, diversity and competitiveness, which it credits as helping the country achieve reasonably robust medium-term growth against very high per capita incomes.

“The government of Korea’s Aa2 rating reflects Korea’s ‘very high’ economic strength, ‘very high’ institutional strength, ‘very high’ fiscal strength, and ‘moderate’ susceptibility to event risks stemming from North Korean military provocations and regime instability,” according to the ministry’s statement. “Our Sovereign Bond Methodology scorecard rating range for Korea is Aa1-Aa3.”

“In the past, Korea’s overall growth dynamics have proved relatively resilient to external financial market fluctuations and turmoil, for instance during 2008-09. Looking ahead, actual and potential GDP growth will be lower than they have been in past decades,” the assessment added. “However, projected growth rates of 2 percent to 3 percent over the next five years compare favorably with growth rates of many other advanced economies. We expect Korea to post the fourth-highest average growth rate among highly rated advanced economies for the period 2011-20.”

Moody’s assessment also added that the credit challenges Korea still faces include the implementation of structural reforms to maintain competitiveness in light of a rapidly ageing population; high nonfinancial public corporation debt; high and rising household debt; and elevated geopolitical risks in relation to North Korea.

By Julie Jackson (juliejackson@heraldcorp.com)