Moody's Investors Service has maintained a high sovereign credit rating for South Korea despite tensions resulting from the North’s nuclear threats.
 
The global ratings agency announced on Wednesday that South Korea’s rating will continue to be a stable Aa2, the third highest rating in Moody's system.
 
The agency said that it decided to keep its rating for South Korea based on the nation’s strong economic recovery, financial soundness and transparent system of government.
 
The agency noted the capacity to effectively implement government policies as a major strength of South Korea. It also said South Korea has competitiveness in terms of transparency and policy predictability.
 
Moody’s said that South Korea’s new government is pursuing economic policies aimed at comprehensive growth. It predicted that if the South Korean government succeeds in establishing a fair economy by improving governance and revamping conglomerates, it will see a boost in its potential growth and improvement in its systematic stability.
 
The agency said it believes South Korea will be able to see growth in the two to three percent range in the next five years. As obstacles to growth, the agency cited an aging society, corporate restructuring and high household debt.
 
As potential risks, the agency said uncertainties related to North Korea are mounting, adding that a military clash on the peninsula would greatly affect South Korea’s credit rating. However, it was quick to add that up to now, such possibilities are having little impact on the economy and financial markets. 
 
Moody’s upgraded South Korea's credit rating from Aa3 to Aa2 in December 2015, and has kept it unchanged for 22 months.