By Kim Tae-jong
There is a growing chance rising inter-Korea tension will develop into a military confrontation, hurting South Korea's sovereign rating, according to global credit ratings agencies, Wednesday.
"We believe that risks to sovereign credit quality increase when inter-Korean tensions are raised," said Kim Eng Tan, senior director of Asia-Pacific Sovereign Ratings at Standard & Poor's, in an email interview.
"With both sides raising the stakes, the chances of missteps or miscalculations are also rising. An unintentional triggering of military confrontation is possible, although we don't expect this for the moment," he added.
He pointed out that the current sovereign rating is based on assumptions that the two countries will not be engaged in a major military conflict.
"If they prove false, there could be negative implications for the sovereign rating. Depending on how the scenario unfolds, we will lower the rating by one or more notches," he said.
S&P's remarks came as inter-Korea tension has been growing after Pyongyang fired more than 100 artillery shells and rockets over the maritime border in the West Sea, and Seoul returned fire.
Last week, the reclusive state also threatened to conduct a new type of nuclear test in protesting the U.N. condemnation of its ballistic missile launches.
Mauro Guillen, professor at the Wharton School of the University of Pennsylvania, said that to avoid a downward adjustment of its sovereign rating, Seoul should focus on controlling the tension. "The key is for the tension to be contained at a low level. That is really important,"
To prevent any unexpected conflict on the Korean peninsula, experts suggest that China should take a more active role in meditating disputes between the two Koreas, especially regarding the North' nuclear tests.
"Nuclear tests are far more disturbing that just firing shells. This is something that needs to be strictly monitored," said Guillen. "Eventually, China must be involved in reining in North Korea. China should see that its interest lies in a stable North East Asian region."
However, it seemed that citizens and even experts do not believe that there will be a full-scale war that would cause physical damage to either of the two countries, as they are now used to Pyongyang's repeated war rhetoric.
"We do not consider the latest round of provocations between the North and South as a surprise given tensions were revived back in 2012," Art Woo, director of sovereign ratings at Fitch Ratings, said.
"Moreover, we believe that the risk of a regime collapse or military escalation in North Korea remains remote," he added.
There is a growing chance rising inter-Korea tension will develop into a military confrontation, hurting South Korea's sovereign rating, according to global credit ratings agencies, Wednesday.
"We believe that risks to sovereign credit quality increase when inter-Korean tensions are raised," said Kim Eng Tan, senior director of Asia-Pacific Sovereign Ratings at Standard & Poor's, in an email interview.
"With both sides raising the stakes, the chances of missteps or miscalculations are also rising. An unintentional triggering of military confrontation is possible, although we don't expect this for the moment," he added.
He pointed out that the current sovereign rating is based on assumptions that the two countries will not be engaged in a major military conflict.
"If they prove false, there could be negative implications for the sovereign rating. Depending on how the scenario unfolds, we will lower the rating by one or more notches," he said.
S&P's remarks came as inter-Korea tension has been growing after Pyongyang fired more than 100 artillery shells and rockets over the maritime border in the West Sea, and Seoul returned fire.
Last week, the reclusive state also threatened to conduct a new type of nuclear test in protesting the U.N. condemnation of its ballistic missile launches.
Mauro Guillen, professor at the Wharton School of the University of Pennsylvania, said that to avoid a downward adjustment of its sovereign rating, Seoul should focus on controlling the tension. "The key is for the tension to be contained at a low level. That is really important,"
To prevent any unexpected conflict on the Korean peninsula, experts suggest that China should take a more active role in meditating disputes between the two Koreas, especially regarding the North' nuclear tests.
"Nuclear tests are far more disturbing that just firing shells. This is something that needs to be strictly monitored," said Guillen. "Eventually, China must be involved in reining in North Korea. China should see that its interest lies in a stable North East Asian region."
However, it seemed that citizens and even experts do not believe that there will be a full-scale war that would cause physical damage to either of the two countries, as they are now used to Pyongyang's repeated war rhetoric.
"We do not consider the latest round of provocations between the North and South as a surprise given tensions were revived back in 2012," Art Woo, director of sovereign ratings at Fitch Ratings, said.
"Moreover, we believe that the risk of a regime collapse or military escalation in North Korea remains remote," he added.
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