Although retaining a stable outlook and an A+ sovereign rating for Taiwan, Fitch Ratings, an international rating agency, yesterday expressed concern over the nation's post-election political dispute. \n"We're incorporating political and cross-strait risks into our sovereign rating for Taiwan," Brian Coulton, senior director and head of Asia sovereign ratings at Fitch Ratings, said yesterday at a seminar in Taipei while presenting an overview of local conditions. \nCoulton said that the lingering dispute over Saturday's presidential election result is expected to extend the period of political uncertainty and undermine the legitimacy of President Chen Shui-bian (陳水扁). \nThe political stand-off may also entail the risk of reduced policy effectiveness, diminishing prospects for the nation's future banking reforms and fiscal policy adjustments, he added. \nHowever, only if protracted political tensions negatively impact the nation's upcoming economic recovery would Fitch Ratings consider revising its sovereign rating for Taiwan, Coulton said. \nPreviously, Chen's call for a referendum worried rating agencies about the possibility it would rile Beijing into detoriating the cross-strait relationship. But as the votes failed, Coulton said that the "no show" result greatly reduced the likelihood of military confrontation between Taiwan and China while easing concerns about the president's future moves toward a sovereign vote. \nWhile some Taiwanese businessmen worry that Chen's narrow election victory would slow the development of cross-strait links, Coulton said he believed the incumbent president would adopt a "pragmatic approach" when dealing with cross-strait issues in his next four-year tenure. \nChen yesterday vowed to begin mending the relationship with China during his second term, saying he had no pressure to get re-elected. \nCoulton further predicted the nation's economic growth rate (GDP) would hit 4.7 percent this year, saying several positive signs, including growing exports, bank credit and private consumption, indicate a healthy economic recovery. \nOn Monday, another international ratings agency, Standard & Poor's, also said that it would not change its view on Taiwan's credit ratings for the moment, since it expects the current political impasse to be resolved soon. \nBut S&P yesterday warned that the nation's banking sector still faced a lot of challenges ahead, although it had become healthier after the aggressive write-off of non-performing loans in the past three years. \nThe ratings agency estimated that the nation's bad-loan ratio may decline to between 5 and 7 percent by the year's end from its high of 15 percent at the end of 2001. \nMost industrialized countries have bad-loan ratios of less than 2 percent, so there was still room for improvement with Taiwan's bad-loan problem and financial transparency, S&P said. \n"The local banking sector should continue to reinforce its risk management before the arrival of the next economic recession," the ratings agency said in a statement.
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