Fitch Ratings maintained South Korea's rating at 'AA-' with a stable outlook, a grade it has kept since upgrading from 'A+' in 2012. Moody's and S&P Global Ratings also kept their ratings at 'Aa2' and 'AA' respectively, both with stable outlooks.
The affirmations came after President Yoon Suk Yeol declared martial law and deployed military forces to the National Assembly on Dec. 3, triggering widespread protests and initial market volatility.
"We assume that the challenges raised by the declaration of martial law will be resolved through constitutional means," Fitch said in its assessment on Dec. 6, adding that the financial market risks appear manageable, with, "swift rescinding of martial law and a proactive response from the Bank of Korea and Ministry of Economy and Finance".
The stable rating outlook reflects a broader pattern among developed economies where political turbulence alone rarely triggers downgrades. S&P's recent downgrade of France from 'AA' to 'AA-' was primarily driven by increasing debt and fiscal deficits, rather than its current political crisis.
"While emerging markets often see rating adjustments during political crises, developed nations rarely face rating impacts from political issues alone," said Kim Sung-soo, a researcher at Hanwha Investment & Securities. "As seen in cases like the Obama administration or recent events in Israel, developed nations' ratings typically shift when political changes translate into economic impact."
However, rating agencies warned of potential risks if the political standoff continues. Fitch noted that planned labor union strikes citing presidential resignation could impact the economy, while a potential impeachment could lead to significant policy shifts.
The country's won currency and Korean-related financial products globally experienced sharp movements on the day of the martial law declaration, though markets have since stabilized following regulatory assurances of adequate liquidity support.
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