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.
UNPRECEDENTED PACE: Micron Technology has announced plans to expand manufacturing capabilities with the acquisition of a new chip plant in Miaoli Micron Technology Inc unveiled a newly acquired chip plant in Miaoli County yesterday, as the company expands capacity to meet growing demand for advanced DRAM chips, including high-bandwidth memory chips amid the artificial intelligence boom. The plant in Miaoli County’s Tongluo Township (銅鑼), which Micron acquired from Powerchip Semiconductor Manufacturing Corp (力積電) for US$1.8 billion, is expected to make a sizeable capacity contribution to the company from fiscal 2028, the company said in a statement. It would be an extended production site of Micron’s large-scale manufacturing hub in Taichung, the company said. As the global semiconductor industry is racing to reach US$1 trillion
A man walks past real-estate advertisements outside a house in Taipei yesterday. The central bank yesterday said it plans to establish an “Inflation-at-Risk” gauge as a supplementary tool for observing inflation, as policymakers express wish to communicate more effectively with the public when making inflation forecasts.
ABOVE LEGAL REQUIREMENT: The Ministry of Economic Affairs is prepared if LNG supply is disrupted, with more than the legal requirement of 11 days of inventory Taiwan has largely secured liquefied natural gas (LNG) supplies through May and arranged about half of June’s supply, Minister of Economic Affairs Kung Ming-hsin (龔明鑫) said yesterday. Since the Middle East conflict began on Feb. 28, Taiwan’s LNG inventories have remained more than 12 days, exceeding the legal requirement of 11 days, indicating no major supply concerns for domestic gas and electricity, Kung said at a meeting of the legislature’s Economics Committee in Taipei. The ministry aims to increase the figure to 14 days by the end of next year, he said. While one or two LNG or crude oil shipments for May
Taiwan’s food delivery market could undergo a major shift if Singapore-based Grab Holdings Ltd completes its planned acquisition of Delivery Hero SE’s Foodpanda business in Taiwan, industry experts said. Grab on Monday last week announced it would acquire Foodpanda’s Taiwan operations for US$600 million. The deal is expected to be finalized in the second half of this year, with Grab aiming to complete user migration to its platform by the first half of next year. A duopoly between Uber Eats and Foodpanda dominates Taiwan’s delivery market, a structure that has remained intact since the Fair Trade Commission (FTC) blocked Uber Technologies Inc’s
RSS