Sat, Dec 04, 2004 - Page 11 News List

Credit downgrade due to misunderstanding: official


A lack of a deep understanding of Taiwan has led the Standard & Poor's Ratings Services (S&P) to slap a negative credit outlook on the country, Council for Economic Planning and Development (CEPD) Chairman Hu Sheng-cheng (胡勝正) said yesterday.

Hu was referring to a report released by the world-renowned expert body Tuesday, wherein its outlook for Taiwan was revised to negative from stable as a result of the rising tensions in Taiwan-China relations, high structural fiscal deficits and a growing government debt burden.

Hu admitted that the revision should be viewed as a warning to Taiwan, but claimed it also reflected some "mistaken concepts" about Taiwan that the government must try to address.

On cross-strait relations, Hu pointed out that President Chen Shui-bian (陳水扁) has repeatedly expressed goodwill to China by offering to enhance economic and trade exchanges and pledging to maintain peace and stability across the Taiwan Strait.

The government is also trying to start negotiations with Beijing on the launch of cross-strait passenger and cargo charter flight services, Hu said.

Hu said the S&P assessment could have been "misled" by the temporary disturbance in the domestic political scene, as it was conducted at a time when Taiwan was gearing up for the Dec. 11 legislative elections.

On the fiscal deficits, Hu said, the government has lessened its capital expenditure over the past few years since Taiwan experienced the first negative economic growth in 50 years in 2001 and an obvious decrease in tax revenue.

However, the deficits as a percentage of gross domestic product (GDP) started to decline last year as the economy recovered and the economic growth is expected to reach 5.93 percent or even 6 percent this year, Hu noted.

The combined public and private investment is predicted to account for 20 percent of the GDP this year, with the ratio of private investment likely to hit 24 percent of GDP, Hu said.

Hu said he believes S&P will change its opinion of Taiwan after the new figures are released.

Meanwhile, he said, the government's "10 major construction projects," will raise the ratio of public investment to a desirable level.

The growth of government investment is forecast at 3.1 percent next year, the first positive figure after five years of negative growth, he added.

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