Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Courthouse violence adds to concerns over Korea's credit rating
Acting President Choi Sang-mok speaks during a video meeting with representatives from Moody's Ratings, a global credit appraiser, at the Government Complex Seoul, Jan. 9. Yonhap
By Yi Whan-woo
An instance of mob violence that erupted on Sunday in protest of a court’s decision to formally arrest President Yoon Suk Yeol is feared to negatively impact Korea’s sovereign credit rating.
A sovereign credit rating is a measure of a country's creditworthiness. A poor or worsening rating can have serious consequences for a country’s economy, as it affects borrowing costs for both the nation and financial and business entities, with these costs ultimately being passed on to the public.
As Yoon was being arrested over his martial law declaration, some of his supporters unleashed their anger by breaking into the court and leaving a trail of destruction.
This brazen act of violence against the judicial system appears not to have been taken into account when three global credit agencies expressed a common view that Korea’s credit rating would remain stable, even after Yoon's short-lived attempt to impose martial law on Dec. 3, 2024.
However, the three agencies — Moody's Ratings, Fitch Ratings and S&P Global Ratings — later assessed that prolonged political instability could negatively affect the nation's credit rating, as the unrest rattled the stock market, the Korean currency and other parts of the economy.
The violent situation could undermine efforts by the nation's economy-related ministries and government institutions to promote Korea as possessing a strong and stable democratic system to foreign investors after the martial law debacle, according to experts.
“Under the circumstances, the mob violence shows that the political turmoil can escalate further, increasing the risk of a cut on Korea’s credit ratings,” Chung-Ang University economics professor Ryu Deok-hyun said.
While the three agencies typically update their respective ratings each spring, the professor noted that their updates could come earlier.
He pointed out that Moody’s downgraded France’s credit rating in December following a monthslong political crisis and the disputed appointment of the prime minister.
A researcher at a private economic think tank said on condition of anonymity that the Constitutional Court “should review Yoon’s impeachment case as quick as possible,” adding “Once a credit rating is downgraded, it takes years to recover.”
The researcher warned that a possible downgrade of the rating could prompt foreign investors to pull their money out of the Seoul market, which, in turn, could lead smaller domestic investors to take similar action.
S&P has maintained Korea's long-term sovereign credit rating unchanged since August 2016 at AA, the third-highest rating.
Moody’s has also kept its rating for Korea at Aa2, the third-highest level on the company’s table, since December 2015.
Fitch has maintained Korea's sovereign credit rating at AA-, the fourth-highest level, since September 2012.
Korea's credit ratings have improved steadily since their decline during the Asian financial crisis in the late 1990s.