France's 'political instability' contributed to credit downgrade...What about Korea?

Concerns over adverse political instability in external credibility immediately after martial law
Taking care of the top three Sinpyeongsa Temple...Explaining the situation twice in urgent letter
National credit rating takes longer to restore if it falls
Sinpyeongsa Temple said, "I can't overlook prolonged political instability and negative effects."

[Anchor]
International credit rating agencies, which adjusted France's credit rating last year, cited political instability as one of the reasons, also mentioned the political situation in Korea.

Right now, the impact on the economy is limited, but it cannot be overlooked if it is prolonged.

It is analyzed as a major reason why acting authority Choi Sang-mok is forced to show a cautious attitude on political issues.

Reporter Park Hee-jae reports.

[Reporter]
Acting President Choi Sang-mok has been concerned about the impact of political instability on foreign credibility since shortly after the emergency martial law.

[Choi Sang-mok / Then Deputy Prime Minister and Minister of Strategy and Finance (December 4th last year): I will share the situation closely and promptly with international credit rating agencies, major economic lines such as the United States, domestic economic organizations, and financial markets.]

Since sending an urgent letter to the three major international credit rating agencies the day after martial law, they have explained the situation twice in person in a month.

We are also preparing for a Korean economic briefing session by using former Financial Services Commission Chairman Choi Jong-gu as an ambassador for international financial cooperation.

The three major credit companies, S&P, Moody's, and Fitch, currently rate Korea as AA, Aa2, and AA-, which are advanced countries.

If the national credit rating, an indicator of external credit, falls, it will not only raise interest rates on government bonds, but also put a heavy burden on the stock market and the exchange rate.

[Seok Byung-hoon/ Professor of Economics at Ewha Womans University] If the national credit rating falls, foreign investment funds from Korea will be withdrawn rapidly, which could lead to a fall in stock prices. The won-dollar exchange rate is also feared to soar.

In particular, once the national credit rating falls, it takes a lot of time to restore it.

It took 18 years for Korea's credit rating, which fell to 10 levels in the 1997 foreign exchange crisis, to recover, and in the case of the United States, it has not recovered even if the credit rating has fallen to 14 years.

In particular, "political anxiety" is also considered a factor influencing credit ratings.

In France, where credit ratings fell last year, appraisers analyzed that "political divisions" could exacerbate the deepening fiscal deficit.

Although Korea's economy cannot be directly compared to France, which has been diagnosed with "financial instability," experts say that if the impeachment phase is prolonged or the rate of increase in government debt to GDP increases faster due to economic stimulus measures, it cannot be guaranteed to maintain the credit rating.

In a recent video interview with acting chief Choi Sang-mok, the three major credit rating agencies also said, "If political uncertainty is prolonged, the negative impact cannot be overlooked."

I'm Park Heejae of YTN.

Reporter for filming
: Ko Min-cheol
Video editing: Kim Jiyeon
Graphics: Lee Ga-eun