Fitch Ratings yesterday kept Taiwan’s “A+” and “AA-” long-term foreign and local currency issuer default ratings with a stable outlook, in line with the nation’s healthy external finances and resilient economy.
“Fiscal consolidation since 2010 has eased what had previously been viewed as a rating weakness relative to peers in public finances,” the international ratings agency said.
Taiwan is one of the largest net external creditors in the sovereign, bank and non-bank sectors, with foreign exchange reserves, including gold, expected to reach US$425.4 billion at the end of this year, Fitch said.
Taiwan runs a persistent current account surplus, averaging 9.1 percent of GDP between 2007 and last year. This strong external buffer serves to insulate the sovereign rating in times of severe external shocks, Fitch said.
The agency forecast Taiwan’s GDP growth would slow to 1.5 percent this year, from 4 percent last year, weighed by deterioration in the global economy, the report said.
Nevertheless, deeper economic integration with China will strengthen Taiwan’s economic prospects over the medium to long-term, Fitch said.
Taiwan’s fiscal deficit narrowed to 2.2 percent of GDP last year from 3.3 percent in 2010 and 4.5 percent in 2009, while government debt rose to 49.2 percent of GDP from 47.1 percent in 2010, Fitch said.
The debt burden accelerated because the financial health of non-profit special funds outside the headline budget — which are used to deliver public services including health and education — continued to deteriorate, the agency said.
Some of these funds are facing heavy financial burdens and their combined debt rose to 6 percent of GDP last year from 5.2 percent in 2007, Fitch said.