Fitch: Korea summit eased tensions, didn't erase risks

LONDON (AA) - Last week's summit between the leaders of North and South Korea eased tensions on the peninsula, which have been elevated in recent months, but does not eliminate risks associated with the military standoff, said Fitch Ratings on Monday.

The process of normalizing relations is likely to be lengthy and unpredictable, even if begun in earnest, according to a Fitch statement.

“South Korean President Moon Jae-in and North Korea's Kim Jong-un met on last Friday -- the first time a North Korean leader has visited South Korea since 1953 -- in a summit which the South Koreans said would aim to 'lay stepping stones toward denuclearization and permanent peace',” Fitch said.

Saying that the long-term stand-off results in geopolitical risks to South Korea's sovereign balance sheet, Fitch warned: “These relate not only to the potential for conflict, but also to the possibility of reunification costs arising over the long term.”

“The economy (South Korea) expanded by an above-trend 3.1 percent last year, bolstered by supportive economic policies and financial conditions, and by the pick-up in global trade. The Bank of Korea's advanced estimate of first quarter of 2018 real gross domestic product (GDP) growth, released last week, showed economic growth up by 1.1 percent, and we forecast 2.9 percent growth in 2018 and 2.7 percent next year,” it added.