Fitch Ratings yesterday retained its negative outlook on Taiwan’s AA long-term local currency rating on lingering concerns over the nation’s deteriorating fiscal condition and weaker economic recovery compared with other emerging economies in the region.
The UK-based agency early last year lowered its outlook rating on Taiwan to negative from stable, in view of the nation’s increasing public debt and declining tax revenue after the government adopted measures to mitigate the effects of the global financial crisis.
“We retain the rating on Taiwan because of its weak fiscal outlook,” Vincent Ho (何永燊), associate director on Fitch’s Asia-Pacific sovereign ratings team, told a conference in Taipei.
The government’s debt is rising while tax revenue is shrinking and fiscal consolidation in the medium term may not be credible, Ho said.
To stimulate the economy, Taiwan has since January last year cut inheritance tax to a flat 10 percent from a range of 2 percent to 50 percent and recently lowered corporate income tax from 25 percent to 17 percent.
Meanwhile, the government has raised debt to finance infrastructure expansion and assorted welfare programs for the disadvantaged and the unemployed.
Taiwan’s public debt is approaching its legal limit, as government expenditure remains high, while tax revenues have shown little improvement since emerging from global recession, Ho said.
The analyst expects the nation’s economy to expand by 7.9 percent this year, from a contraction of 1.9 percent last year, but noted that its five-year average performance hovers slightly above 3 percent, slower than emerging Asia’s median of more than 5.5 percent.
Fitch also retained its “A+” stable outlook on Taiwan’s foreign currency rating on strong external finances attributing to robust exports, the report showed.
The current-account surplus continues to boost the nation’s foreign-exchange reserve accumulation, which has reached more than 130 percent of GDP, the report said.
However, Ho voiced concern that high unemployment in the US and Europe may weaken demand for Taiwanese electronics, casting uncertainty on the nation’s economic prospects.
“While a global double-dip is unlikely, risks remain because Fitch hasn’t bought into Asian decoupling yet,” Ho said, referring to the argument that Asia has become independent from the West in shoring up its economy.
When Lika Megreladze was a child, life in her native western Georgian region of Guria revolved around tea. Her mother worked for decades as a scientist at the Soviet Union’s Institute of Tea and Subtropical Crops in the village of Anaseuli, Georgia, perfecting cultivation methods for a Georgian tea industry that supplied the bulk of the vast communist state’s brews. “When I was a child, this was only my mum’s workplace. Only later I realized that it was something big,” she said. Now, the institute lies abandoned. Yellowed papers are strewn around its decaying corridors, and a statue of Soviet founder Vladimir Lenin
UNIFYING OPPOSITION: Numerous companies have registered complaints over the potential levies, bringing together rival automakers in voicing their reservations US President Donald Trump is readying plans for industry-specific tariffs to kick in alongside his country-by-country duties in two weeks, ramping up his push to reshape the US’ standing in the global trading system by penalizing purchases from abroad. Administration officials could release details of Trump’s planned 50 percent duty on copper in the days before they are set to take effect on Friday next week, a person familiar with the matter said. That is the same date Trump’s “reciprocal” levies on products from more than 100 nations are slated to begin. Trump on Tuesday said that he is likely to impose tariffs
HELPING HAND: Approving the sale of H20s could give China the edge it needs to capture market share and become the global standard, a US representative said The US President Donald Trump administration’s decision allowing Nvidia Corp to resume shipments of its H20 artificial intelligence (AI) chips to China risks bolstering Beijing’s military capabilities and expanding its capacity to compete with the US, the head of the US House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party said. “The H20, which is a cost-effective and powerful AI inference chip, far surpasses China’s indigenous capability and would therefore provide a substantial increase to China’s AI development,” committee chairman John Moolenaar, a Michigan Republican, said on Friday in a letter to US Secretary of
ELECTRONICS BOOST: A predicted surge in exports would likely be driven by ICT products, exports of which have soared 84.7 percent from a year earlier, DBS said DBS Bank Ltd (星展銀行) yesterday raised its GDP growth forecast for Taiwan this year to 4 percent from 3 percent, citing robust demand for artificial intelligence (AI)-related exports and accelerated shipment activity, which are expected to offset potential headwinds from US tariffs. “Our GDP growth forecast for 2025 is revised up to 4 percent from 3 percent to reflect front-loaded exports and strong AI demand,” Singapore-based DBS senior economist Ma Tieying (馬鐵英) said in an online briefing. Taiwan’s second-quarter performance beat expectations, with GDP growth likely surpassing 5 percent, driven by a 34.1 percent year-on-year increase in exports, Ma said, citing government
RSS