The debt burden shouldered by the nation’s households was heavier than those in China and Hong Kong largely because of massive home mortgages, Fitch Ratings said on Saturday.
Fitch said in a report that the nation’s household debt accounted for 82.6 percent of GDP in the first half of last year, far higher than the 66.4 percent in Hong Kong and 41.8 percent in China.
Compared with neighboring economies, only South Korea beat Taiwan with a ratio of 90 percent, according to Fitch.
Since 2005, home mortgages have made up more than 50 percent of total household debt in Taiwan, with the ratio hitting a high of 73 percent in 2010 when home prices were soaring, but economic growth has since slowed, Fitch analyst Jenifer Chou (周筱娟) said.
As the nation’s property market weakened at a more noticeable pace in 2014, the home mortgage-to-household debt ratio started to decline, she said.
The ratio now stands near 60 percent, Chou said.
Home mortgages make up about 70 percent of household debt in Hong Kong and 54 percent in China, but the ratio of household debt to GDP in the two markets are lower than Taiwan’s, Fitch said
China’s debt burden of 41.8 percent is the lowest in the Asia-Pacific region, it said.
Taiwanese households also shoulder financial burdens from consumer loans, while many owners of small and medium-sized firms obtained loans for their businesses under their own or a relative’s name instead of the company name, which also boosted overall household debt, Chou said.
In a report released in March, Fitch said that Taiwan’s high household debt and rising debt servicing pressures are expected to affect the nation’s economic growth.
It added that this could prove an impediment to improvements in the financial profiles of Taiwanese banks.
Fitch said it expects the nation’s household debt-to-GDP ratio to increase to 84 percent this year and next, since banks have been aggressively extending working capital loans to individuals and entrepreneurs.
Meahwhile, the average national debt shouldered by each Taiwanese remained flat as of the end of last month for a third consecutive month, according to Ministry of Finance statistics.
The national debt per capita was about NT$240,000 (US$7,944.4), according to the National Treasury Administration.
As of last month, the nation’s outstanding long-term debt with a maturity of more than one year totaled NT$5.43 trillion, while the nation’s short-term debt was NT$222.9 billion, the agency said.
As President Tsai Ing-wen’s (蔡英文) administration plans to spend NT$880 billion over the next eight years on infrastructure projects, there are concerns that the national debt could soar.
However, the funds would be allocated over a period of eight years and not spent at one time, the ministry said, adding that the government is planning to allocate a budget of NT$22.9 billion for this year.
If that budget is added to the total national debt at the end of last month, national debt per capita would increase to NT$241,000, the ministry said.
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