Standard & Poor’s (S&P) Ratings Services yesterday maintained a stable outlook on the nation’s sovereign ratings, affirming its “AA-” long-term and “A-1+” short-term unsolicited issuer credit ratings for Taiwan.
The international rating agency’s latest analysis and outlook remained unchanged, compared with the last report it made on Jan. 16, just after President Ma Ying-jeou (馬英九) won a second term in office.
S&P said Taiwan’s strong external position, sound monetary management and dynamic information technology (IT) companies supported the country’s sovereign ratings.
“Taiwan’s consistently large current account surpluses have enabled it to accumulate high foreign exchange reserves, which we project will exceed US$400 billion by the end of this year,” S&P credit analyst Phua Yee-farn (潘怡帆) wrote in a statement.
On Monday, the central bank said Taiwan’s foreign exchange reserves totaled US$391.11 billion as of the end of last month, down US$127 million from a month earlier and maintaining Taiwan’s position as the world’s fourth-largest holder of foreign exchange reserves, behind China, Japan and Russia.
This amount of foreign exchange reserves and the central bank’s substantial monetary flexibility are likely to provide an ample cushion for the country’s export-reliant economy, which is small and vulnerable to external shocks, S&P said.
However, Phua said Taiwan’s elevated government debt burden, modest prosperity as measured by its GDP per capita of just over US$20,000 and political factors remain the country’s key credit weaknesses.
S&P has maintained a stable outlook on Taiwan’s “AA-” long-term and “A-1+” short-term ratings since June 2010.
The agency said it may upgrade the ratings if the government can implement structural reforms to diversify the economy, significantly raise per capita income and lower its budgetary and off-budget shortfalls.
However, a downgrade would also be possible if Taiwan’s fiscal deficits widen in the near future and the country experiences a sharp deterioration in cross-strait relations, S&P said in the statement.