Fitch Ratings maintained its sovereign credit rating on Taiwan at "A+" with a stable outlook yesterday, supported by the nation's declining debts and fiscal results.
"Taiwan's strengthening external financial position and improving public finances help to support its sovereign ratings," said Vincent Ho (
Ho, however, expressed concern over the relatively weak banking sector, uncertainties surrounding next year's elections and the UN membership referendums, although cross-strait relations are expected to improve after the elections.
"Political changes could lead to policy adjustments that will slow down Taiwan's fiscal improvement," Ho said in a statement yesterday.
Fitch said that the government's fiscal balance had outperformed the "A" peer group medians in both 2005 and last year, and that performance was expected to carry on into 2009, the statement said.
The rating agency expects the government's debt to fall to 40.7 percent of GDP and 226.1 percent of fiscal revenue this year, which will still be better than the "A" peer group medians.
Overall, Fitch believed that Taiwan's fiscal position has substantially improved after taking into consideration the government's growing tax revenues related to GDP and effective control over spending.
Fitch also predicted the current account balance, which was in excess of 6.8 percent of GDP last year, would widen to 7.3 percent this year, although it said foreign currency reserves would not grow at as fast a pace in the next two years due to net capital outflows.
Fitch also expected Taiwan's gross external debt to stabilize at 31 percent of GDP and public external debt to fall to 2.6 percent of GDP this year.
Taiwan's net external credit was expected to stay at around 75 percent of GDP and remain strong at 98 percent of current external receipts, all of which confirmed its "A+" rating, the agency's statement said.
In the banking sector, Fitch warned that the government directed Debt Restructure Program might extend credit losses to drag down the industry's already low profits, although it noted that the card-debt crisis has been greatly relieved.
Taiwanese banks' subprime mortgage-related exposure and losses have been manageable in terms of the size of assets and net worth, Fitch said.
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