Despite concerns over the nation's public finances and cross-strait tensions, Fitch Ratings yesterday maintained its sovereign credit rating on Taiwan at "A+" with a stable outlook.
The international rating agency said it decided to keep Taiwan's rating unchanged given its strong foreign exchange reserves and large holdings of external assets relative to GDP.
But Fitch cautioned that both politics and public finances could still obstruct growth.
"Taiwan's election calendar is full, not to mention cross-straits issues are always in focus," James McCormack, head of Asia sovereign ratings at Fitch, told its annual Asian Sovereign and Banking Conference in Taipei yesterday.
On the public finance front, Fitch's data showed that the nation's government debt ratio was on the rise and expected to hit 43.3 percent of GDP this year.
The figure surpassed the median values of below 35 percent for all "A" rated countries, McCormack said. In fact, Taiwan's debt level is going up while other "A" rated countries' debt levels are going down, he said.
In response to Fitch's warning, the Ministry of Finance said that the government saw a stable growth in tax revenues in the first half of this year and expects tax revenues this year to exceed its target by NT$60 billion (US$1.82 billion).
As the government has tightened control over expenditures, the ministry expects the government deficit to account for less than 1 percent of GDP this year, the ministry said in a statement posted on its Web site.
The ministry added that the government deficit for fiscal year 2008 of NT$97.9 billion would be NT$41.8 billion, or 29.9 percent, lower than the NT$139.7 billion deficit recorded in fiscal year 2007.
In general, McCormack said that Taiwan and the rest of the region were well placed to deal with credit market adjustments, "given the large stock of foreign exchange reserves, strong balance of payments positions and more flexible exchange rate regimes."
Still, this does not exempt the region from being vulnerable to slowdowns in global economic growth and large capital inflows in recent years could test regional policymakers if investor sentiment changes quickly, he said.
Commenting on the local financial sector, the ratings agency said that the profitability of local banks was weakening on slowing loan growth and narrowing interest margins.
Joyce Huang (
Total loan growth in the first half of the year rose only 2.5 percent from the same period last year, she said.
Growth last year was also slow at 2.5 percent, compared with 8.3 percent in 2005 and 10.1 percent in 2004.
Wealth management and offshore banking will become the key growth drivers for banks, she said.
The wealth management sector, including deposits, mutual funds and equities, continue to be in demand among investors, she said.
On the US subprime lending issue, Fitch said it would not have a large impact on Asian banks given their relatively low subprime-related investment.
The largest exposure held by a Taiwanese bank is only 7 percent of equity, said David Marshall, Fitch's managing director of Asia-Pacific financial institutions.
A Thai bank has the highest exposure among Asian banks, at around 20 percent of equity, he said.
However, concerns over the indirect effects from providing liquidity to conduits and investors' losses in banks' asset management arms remain, he said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day