Fitch Ratings last week affirmed its “AA-” credit rating for Taiwan, as the nation maintains sound external finances, economic growth, a competitive business environment and high governance standards.
“These strengths remain in place despite the economic disruptions from the coronavirus pandemic,” the ratings agency said in a release on Thursday.
Taiwan has been an outperformer in the global economy this year, in large part due to its success in containing the local spread of COVID-19 without resorting to massive lockdown measures, it said.
Photo: Bloomberg / I-Hwa Cheng
Taiwan’s GDP grew 0.8 percent in the first half of the year and might sustain a gradual recovery in the second half with a 1 percent increase for the whole of this year, well above the “AA” median of a 7.1 percent decline, Fitch said.
Taiwan’s fiscal policy has become more expansionary due to government efforts to cushion the economy from the coronavirus shock, it said.
Fitch forecast a government deficit of 2.1 percent of GDP this year, compared with a surplus of 0.1 percent last year, well below the “AA” median deficit of 8.6 percent of GDP.
Gross government debt is estimated to rise to 39.1 percent of GDP next year, up about 2 percentage points from last year, but the ratio is still well below the “AA” median of 48.5 percent of GDP, it said.
Taiwan’s external finances are among the strongest across Fitch’s rated sovereigns and are unlikely to be undermined by the coronavirus shock, with external creditor position likely to remain stable at about 215 percent of GDP this year, compared with the “AA” median of 3.6 percent, it said.
With a current-account surplus for more than 30 years, Taiwan’s foreign-reserve buffers are projected to hover at about 17.7 times external payments this year, well above the “AA” median of 4.6 times, Fitch said.
However, Taiwan’s ratings are constrained by its low per capita income relative to “AA” economies and its complex relations with China, it said.
RESTRUCTURING: Taichung and Taoyuan profited most from local firms moving back high-end manufacturing amid the US-China decoupling of trade ties, the ministry said The government’s “Invest in Taiwan” initiative might this year see NT$627.1 billion (US$21.7 billion) of investment pledges realized, with several firms raising stakes and two dropouts due to customer losses, Minister of Economic Affairs (MOEA) Wang Mei-hua (王美花) said yesterday. Wang made the statement at the monthly meeting of the Third Wednesday Club, a local trade group featuring the top 100 firms of each business sector. Since early last year, the government has launched three programs intended to help local companies grapple with US-China trade rows and the COVID-19 pandemic, mainly through moving production lines back to Taiwan. Thus far, the ministry
JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫)
OVERHEATED MARKET?: The gauge would be designed to provide more reliable information than private-sector data, and help improve policymaking, the council said The National Development Council (NDC) is considering creating a business climate index on Taiwan’s property market, allowing policymakers to better monitor market movements and intervene if necessary, NDC Minister Kung Ming-hsin (龔明鑫) said yesterday. Kung made the remarks at a meeting of the legislature’s Economic Committee where lawmakers from across party lines voiced concerns about housing price hikes driven by capital repatriation. Kung said that the council is assessing the possibility of creating an index designed to provide more accountable and transparent information than data provided by private-sector market analysts, and could help improve policymaking. The council would compile a report on
STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector