N. Korea‘s provocation negative for S. Korea‘s credit: Moody‘s

WASHINGTON (Yonhap) -- North Korea's launch of a ballistic missile last week shows that South Korea's geopolitical risk has not eased and it may bode ill for Seoul's credit outlook, a top official at Moody's Investors Service said Monday.

"That Pyongyang reneged so soon after having agreed with Washington on 29 February not to test its missiles or nuclear bombs is a credit negative development for South Korea," Tom Byrne, senior vice president of Moody's, said in a report.

"Last week's missile launch moves geopolitical risks back to the status quo prior to the 29 February agreement," he added, referring to a set of deals on confidence-building measures between the U.S. and North Korea.

The U.S. has already announced that it would cancel promised food aid.

"That agreement has proven to be a false dawn for expectations that the new leadership in Pyongyang would follow a path toward easing tensions on the Korean peninsula," Byrne said. "Moreover, tensions could escalate further if North Korea makes further provocations this year, such as a third nuclear bomb test."

The economist added, "Strategic risks from a heavily militarized North Korean state that's hostile to peaceful engagement and accommodation with the South are unchanged."

He said additional sanctions by the U.N. Security Council seem "pointless," as those already enacted for prior nuclear tests have not changed North Korean behavior.

"However, Washington could close loopholes or tighten its sanction regimen. Measures that target North Korea's elite, such as freezing offshore financial assets, have prompted remedial behavior, although transitory, by North Korea," he said.