Taiwan’s GDP should grow by 2 percent this year, as the export-oriented economy should benefit from a continued recovery in the US and a gradual stabilization in emerging markets, S&P Global Ratings said yesterday.
The S&P forecast is better than the government’s estimate of 1.87 percent growth and last year’s 1.35 percent.
“Taiwanese firms are poised to benefit from a continued recovery in the US economy and a gradual stabilization in emerging markets,” said Taiwan Ratings Corp (中華信評), the local arm of the international ratings agency.
Many local technology firms supply critical components for smartphones, tablets, laptops and other consumer electronics.
The improving economic scene would allow Taiwanese firms to maintain stable credit profiles even though the pace of recovery is uneven for different sectors and risks stir underneath, credit analyst Lan Yuhan (藍于涵) said.
Foreign currency exchanges pose a challenge for exporters, after the US Federal Reserve voiced plans to raise interest rates three times this year, Lan said, adding that global funds would flow to the US to pursue higher yields following the rate increases.
In addition, uncertainty over US president-elect Donald Trump’s economic policies and sustained tension between Taiwan and China could further strain the nation’s small and open economy, Lan said.
Volatile commodity prices, modest demand growth and rising competition from rivals abroad could constrain the profitability of Taiwanese firms, Lan said.
Rating pressures vary for corporate subsectors due to different credit cycles and exposure to oversupply and commodity prices, she said.
Local financial services providers will not be spared from ratings risks related to volatile capital and foreign exchange markets, while a potential deterioration in asset quality remains a concern amid worsening credit conditions in the region, Taiwan Ratings said.
Most banks in Taiwan have sufficient capitalization to buffer a potential increase in asset impairment, Lan said.
The rating outlook for structured finance transactions and fixed-income funds is stable although some asset-backed securities are more sensitive to changes in the economy, the agency said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
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