Moody's sees no immediate impact from KMT win

International rating agency Moody's Investors Service said yesterday it saw no immediate rating implications for Taiwan following the Chinese Nationalist Party's (KMT) victory in Saturday's presidential election.

The KMT's Ma Ying-jeou (馬英九) scored a landslide win over Frank Hsieh (謝長廷) of the ruling Democratic Progressive Party.

The KMT win, however, may introduce favorable economic and geopolitical dynamics in the next four years, Aninda Mitra, a vice president and senior analyst with the sovereign risk unit at Moody's, said in a report released yesterday.

"At the least, an improved economic performance and an easing in cross-strait tensions would alleviate potential downside risks to Taiwan's ratings and help to improve over time Taiwan's credit fundamentals," Mitra wrote.

Moody's has an Aa3 sovereign credit rating for Taiwan. In comparison, Standard & Poor's has a credit rating of AA- on Taiwan, while Fitch Ratings rates Taiwan A+. The three agencies have so far kept their ratings on Taiwan unchanged.

"For now, what is reasonably achievable in the next four years of the new administration may not improve Taiwan's credit fundamentals to the extent that key economic and fiscal metrics would move well into the high Aa rating range," Tom Byrne, a senior vice president, said in the same report, entitled Rating and Economic Implications of Taiwan's KMT Election Victory.

During Ma's election campaign, he promised to increase public spending to boost domestic investment, reduce the unemployment rate and expand cross-strait economic ties.

RISKS

However, Ma's proposed NT$4 trillion (US$133 billion) "i-Taiwan 12 infrastructure projects" could pose a risk to public finances, David Hong (洪德生), president of the Taiwan Institute of Economic Research (台經院), said yesterday.

Hong said that general government debt had become a cause for concern in recent years. He suggested that the new administration select and prioritize certain projects to avoid worsening the nation's fiscal problems.

On Tuesday, Fitch Rating said that Ma's proposed infrastructure projects, the cost of which accounts for 29 percent of the nation's GDP this year, coupled with various tax measures, could create financial uncertainty.

Fitch Ratings said that Taiwan's general government debt accounted for 40 percent of its GDP -- a ratio that is higher than the 30 percent for countries that gained similar ratings from the UK ratings agency.

ADDITIONAL REPORTING BY JOYCE HUANG