Thu, Dec 23, 2004 - Page 11 News List

Moody's rating unchanged at Aa3


International ratings agency Moody's Investors Service on Tuesday maintained its "Aa3" foreign currency issuer rating for Taiwan, with a stable outlook.

Moody's commended Taiwan's strong export-oriented economy, the high level of foreign exchange reserves and low external debt as contributing to the nation's improved credit fundamentals, the ratings agency said in a report.

"Taiwan's rating outlook is supported by the demonstrated resilience of the economy and the maintenance of a very strong external payments position," Moody's vice president Thomas Byrne said in the report.

The nation's exports grew 12.5 percent year-on-year to US$15.51 billion last month, while foreign exchange reserves hit a record US$239.13 billion at the end of last month, according to government statistics.

Moody's forecast Taiwan's foreign exchange reserves to reach US$250 billion by year's end.

Consequently, external debt accounted for 32 percent of the nation's current account receipts this year, which Moody's regards as a level low enough to ward off external shocks.

The agency added that external debt was held by the private sector, a fact that helped Taiwan maintain its "Aa3" foreign currency rating.

"Greater revenue generation will be a key element of a successful long-term fiscal policy," Byrne said in the report.

While Taiwan is facing increased pressure from rising public debt, the nation's improved economic performance and fiscal reforms could help narrow the national deficit and so cut down the debt, according to the report.

Moody's stable outlook on Taiwan follows a report by another international ratings agency, Standard & Poor's, which last week maintained a negative outlook for Taiwan, given that no positive outcomes were expected for fiscal reform in the short term.

Standard & Poor's on Nov. 30 revised its sovereign outlook to negative from stable based on concerns over the nation's weakening fiscal flexibility and prospects for increased cross-strait tension.

But Fitch Ratings last week affirmed its "A+" sovereign rating for Taiwan and its "AA" rating for the local currency, citing a positive outcome in the legislative elections with regard to maintaining the cross-strait status quo.

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