Fitch ratings on heightened tension over North Korea - impact on South Korea

Fitch Ratings reports via Reuters

• Heightened tension over North Korea's nuclear weapons programme could have a substantial impact on South Korea's economy and cause broader effects if it disrupts trade relations, most notably between China and the US
• Risk of an outright conflict, while rising, is still low
• Tensions are higher than they have been for many years, and the strategic balance is changing
• North Korea continues to strengthen its ability to reach US territory with nuclear weapons, which has raised the possibility of a pre-emptive strike on the North by the US.
• There is also a risk that confrontation could be triggered by an unexpected event or miscalculation on either side.
• Conflict could have a dramatic impact on South Korea's economy and might also be highly disruptive to international financial flows and global trade, given South Korea's importance as a major producer of electronic and automotive components.
• Even without military conflict, further escalation of tensions could have an economic impact on South Korea.
• Tensions also have the potential for global spillovers.
• In particular, there is a risk of a deterioration in trade relations between the US and countries that trade with North Korea.