Taiwan will end a seven-year run of deficits by reporting a surplus for last year and could balance the budget again this year, Finance Minister Ho Chih-chin (何志欽) said.
The nation had a NT$15.5 billion (US$470 million) surplus last year, Ho said, citing an unaudited figure.
In December, the government forecast a NT$50 billion deficit.
Ho said he is "reasonably confident we will have a balanced budget this year."
Balanced budgets may raise the likelihood of a higher debt rating for Taiwan, which ranks behind Singapore, Japan, Australia and New Zealand and ahead of China.
Last year's surplus was attributed to higher-than-expected tax revenue and income from state companies, reduced spending and asset sales, said Esther Chang, a finance ministry executive officer.
"If Taiwan can continue to balance its budget, its credit profile will improve and the chances of an improved credit rating will accordingly rise," said Jonathan Lee (李信佳), a senior director at Fitch Ratings Ltd in Taipei.
The audited figure for last year may be released this month or next month, the government said.
Fitch has given Taiwan's local-currency debt an AA rating, the third-highest investment-grade classification. Moody's Investors Service rated the debt Aa3, its fourth-highest grade.
Ho's confidence contrasts with this year's budget for a NT$217.1 billion deficit, including debt payments. The budget has not yet been approved by the legislature because of a standoff between the ruling and opposition parties.
Better enforcement of tax collection should help boost revenue this year, Ho said on May 4.
Nevertheless, some economists voiced skepticism about the balanced budgets so far in advance of the 2011 target for eliminating deficits, questioning whether accounting methods have changed.
"If we have a budget surplus, it would be a surprise to me," said Cheng Cheng-mount (
Cheng said he was not optimistic about the likelihood of surpluses because of the finance ministry's goal of cutting taxes.
However, Fitch's Lee said: "The budget surplus is a very good beginning for Taiwan because its budget deficits have been a major factor that has restrained its credit rating."
Increased stock and property transactions and progress in blocking tax avoidance may have boosted revenue last year, Lee said.
Government debt was NT$3.82 trillion last year, or 33 percent of GDP, the finance ministry said.
Ratings company Moody's said a balanced budget would allay debt concerns.
Nevertheless, uncertain relations with China remain the biggest constraint on Taiwan's debt rating, said Thomas Byrne, a senior vice president at Moody's.
"Improving government finances should be supportive of the country's credit rating, but that is not a big issue for the markets," said David Cohen, an economist at Action Economics in Singapore.
The pending elections "are more important for Taiwan's rating because they will affect relations with Beijing," Cohen said.
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