Thu, Sep 19, 2019 - Page 12 News List

Fitch Ratings retains its credit outlook for Taiwan

By Crystal Hsu  /  Staff reporter

Fitch Ratings Ltd has maintained its “AA-” rating with “stable” outlook for Taiwan, although changes in the ratings outlook for emerging markets point to a less positive period ahead, Asia Pacific sovereigns director Andrew Fennell told a media briefing in Taipei yesterday.

Global sovereign rating trends have been positive so far this year, with 12 upgrades and nine downgrades, Fennel said.

Going forward, the trend is leaning toward the opposite course, with most of the negative outlooks concentrated in emerging markets, he said.

Several factors contribute to the deterioration of credit outlook for emerging markets, among which is rising government debt levels, he said.

DEBT DIVIDE

In emerging Asia, the region is divided, with half seeing debt increases and half seeing debt declines, Fennel said.

Export growth for emerging markets has fallen to zero, indicating that trade conflicts are having an impact on many countries, not just the US and China, he said.

Additionally, capital outflows from developed markets, which are the most important sources of global capital, are at their lowest since the global financial crisis in 2009, Fennel said.

Foreign direct investment (FDI) outflows from the US, Germany, Japan and the UK are now at zero, Fitch said.

“As FDI is the most stable source of funding for emerging markets, we expect to see an increase in the volatility of capital flows,” he said.

Ratings outlooks across the Asia-Pacific region are mostly “stable,” with the exception of Thailand and Vietnam, which are “positive,” and Hong Kong, which was downgraded to “negative” last week, Fennel said.

BENEFICIARY

Taiwan, with a small and open economy, has benefited from the US-China trade dispute due to trade rerouting by some firms to circumvent tariffs, he said, adding that the Taiwanese government has helped attract China-based companies to shift production bases home by offering incentives.

The government has also made progress in improving its financial health for the past five year, Fennel said.

China’s GDP growth might slow to 5.7 percent next year, from a forecast of 6.1 percent this year, Fitch said.

That would pose a challenge for Taiwan, as China is its largest export destination, accounting for about 40 percent of outbound shipments, government data showed.

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