Moody’s Investors Service has maintained its “Aa3” credit rating for Taiwan with a stable outlook on the back of high per capita income and economic stability, but said the nation’s economy is losing steam.
The “Aa3” rating indicates the nation has a high-quality credit profile with very low credit risk, three notches away from the highest “Aaa” grade, the ratings agency said in a report.
Moody’s attributed its latest rating decision to the nation’s high per capita income, moderate levels of government debt and a track record of government policies that have fostered economic stability and competitiveness.
The nation’s real GDP growth averaged 3.5 percent between 2006 and last year, with nominal GDP hovering at about US$523 billion, almost double the median for the “Aaa” sovereign rating, the report said.
Despite a slowdown in exports, the nation’s balance of payments remains strong, Moody’s said, adding that a strong current-account surplus has helped shelter the nation from external shocks and built a net international investment position twice the size of GDP last year.
The nation’s foreign-exchange reserves have climbed to US$426 billion, more than double the nation’s external debt of US$159 billion, the report said.
Government debt stands at 39 percent of GDP, giving authorities comfortable room for fiscal maneuvering, Moody’s said.
However, the fiscal leeway might taper off as the debt level increasingly approaches the legal ceiling of 50 percent, the agency said.
That scenario looms as listless GDP growth is set to widen budget deficits and drive up debt, it said.
“There are signs Taiwan’s economic strength is eroding given soft real growth last year as weakening exports and investment largely offset support from consumption,” Moody’s said.
Looking ahead, neither cyclical nor structural factors bode well for the nation, the agency said, adding that it expects the economy to grow only 0.5 percent this year and 1.5 percent next year, constrained by sustained lackluster external demand amid rising economic uncertainty.
That forecast is the bleakest so far, lower even than Academia Sinica’s 0.52 percent growth forecast and the Directorate-General of Budget, Accounting and Statistics’ 1.06 percent forecast in May.
China’s economic rebalancing is hurting the Taiwanese economy the most due to its longstanding dependence on the market as an export destination and manufacturing base, the report said.
The government is aiming to diversify trade and investment destinations toward a wider range of economies in the Asia-Pacific region, but has yet to announce the details of the new strategy, the agency said, adding that the relationship between Taiwan and China could affect the effectiveness of the measures.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to post a 25 percent year-on-year increase in sales in the first quarter of this year to US$12.91 billion, up from US$10.31 billion a year earlier, as its production is at full capacity, market advisory firm TrendForce Corp said in a note last week. The increase would help TSMC cement its leadership in the industry by taking a 56 percent market share in the global pure wafer foundry business, TrendForce said. Its forecast was in line with TSMC’s estimate in January, which pointed to a range of US$12.7 billion to US$13 billion for the
MULTI-USE: The arrangement of seats in future vehicles would be different, allowing passengers to do everything they do at home, the CEO of the firm’s EV platform said Electric vehicles (EVs) developed on a Hon Hai Precision Industry Co (鴻海精密) platform would be built like “a smartphone on a different platform,” Jack Cheng (鄭顯聰), chief executive officer of the Hon Hai-initiated MIH Open Platform Alliance, said on Saturday. It would be the ultimate goal to make vehicles built on the platform an extension of the driver’s home, he said during an online presentation. The alliance aims to provide resources to automakers and boost Taiwan’s EV development, with a vision to make an EV its owner’s “second home,” Cheng said. “Whatever they can do in their home, they will be able
RARE POSITION: IHS Markit expects exports to increase by about 13 percent this year, as demand for electronics worldwide has recovered significantly since last year Taiwan’s economy might expand 4.1 percent this year, accelerating from a 3.11 percent pickup last year, as its exports would continue to benefit from surging demand for electronics products amid and after the COVID-19 pandemic, global research body IHS Markit said yesterday. Taiwan has been one of the world’s most resilient economies during the pandemic-triggered recession last year. Economic indicators at the beginning of this year signal improving growth momentum for its economy over the coming months, as the global economy and trade rebounds, the US-British information provider said. According to the latest IHS Markit survey of business confidence in Taiwan, the
Clean energy use and reduction of carbon dioxide emissions are the common consciousness of all countries in the world. Among them, the introduction of renewable energy storage systems and the promotion of electric vehicles are the unanimous implementation of governments and enterprises around the world. The most critical strategic component is the lithium ion battery. Whoever has a higher energy density, lower cost, and higher safety lithium battery will control the development trend of this wave of safer lithium battery technology. All-solid-state batteries are a goal that everyone is striving to pursue. However, the stable and large scale production of solid-state