Moody’s Investors Service yesterday affirmed Taiwan’s sovereign credit rating of “Aa3” and changed its credit outlook for the nation to “positive” from “stable,” the first time the ratings agency has given the nation that credit outlook since 1994.
“The decision to change the outlook to positive from stable reflects increasing signs that Taiwan’s economy is more resilient and that its governance strength is stronger than previously assessed,” Moody’s said in a statement.
The Ministry of Finance welcomed the agency’s move.
Photo: David Chang, EPA-EFE
“This is the first time Moody’s has raised its outlook for Taiwan since 1994, when it first issued its sovereign credit rating,” the ministry said in a statement.
“The positive outlook indicates that the nation’s sovereign rating may be upgraded within one year,” it said.
Taiwan’s export-oriented high-tech manufacturing sector has benefited from demand for semiconductors amid the global surge in remote working, and it is likely to boost the nation’s competitiveness in the medium term, Moody’s said.
That is because changes in people’s behavior and work practices amid the COVID-19 pandemic would continue to boost demand for Taiwan’s products, while the nation’s track record of sound policy effectiveness, aided by robust fiscal and external positions, supports its credit profile, Moody’s said.
Taiwan’s strong fiscal and external buffers would remain intact through the pandemic shock, and continue to strengthen compared with other Aa-rated peers, it said.
However, ongoing geopolitical tensions and the nation’s aging demographic would remain constraints for its credit profile going forward, it said.
Taiwan’s real GDP growth is expected to accelerate to 3.7 percent this year, from 3.1 percent last year, while its fiscal deficit to GDP is predicted to fall to 1 percent this year from an estimated 2.1 percent last year, which Moody’s said is considerably lower than the median fiscal deficit of between 3 and 5 percent of GDP for other Aa-rated economies.
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