S&P Global Ratings yesterday affirmed its “AA+” long-term and “A-1+” short-term credit ratings for Taiwan.
“The stable outlook reflects our expectation that over the next 24 months, risks to the ratings remain fairly balanced,” S&P said in a statement on its Web site.
Structural demand for Taiwanese semiconductor exports is likely to offset headwinds associated with long-standing geopolitical tensions, the ratings agency said.
Photo: CNA
The ratings are anchored on Taiwan’s robust external position and strong economic support, although an ongoing semiconductor downturn would curb Taiwan’s growth in the short term, it said.
Softening global demand for technology products has weighed on key export sectors in Taiwan, with its semiconductor sector particularly exposed to the slowdown, it said.
Weakening global demand would also hit non-tech sectors, particularly suppliers of commodities and consumer products, the agency said.
“We expect Taiwan’s economic growth to slow this year,” S&P said.
However, Taiwan’s electronics manufacturing sector remains dynamic, highly competitive and well-placed to benefit from long-term developments in technology-intensive integrated circuit chips, the agency said.
Although workers around the world have returned to their offices, reducing the need for remote-working equipment, demand for chips would likely remain robust due to a boom in artificial intelligence, 5G network deployment, big data processing and analytics, and electric vehicles, S&P said.
Taiwan’s growth prospects would be brighter than its peers at a similar income level, it said.
Effective policymaking has contributed to the government’s fiscal health, evidenced by robust domestic liquidity and low debt-servicing costs, it said.
“We expect Taiwan to maintain healthy fiscal metrics over the next three to five years,” S&P said.
However, cross-strait tensions continue to constrain Taiwan’s ratings, as a sharp deterioration in risk sentiment could hurt its export-reliant economy and fiscal position, it said.
The ratings agency said cross-strait relations would not deteriorate toward a major military conflict, adding that close economic and trade links between Taiwan and China support this assessment.
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