Fitch Ratings maintained Taiwan’s long-term sovereign credit rating at “AA” in its latest report on Tuesday, a rating that has remained unchanged since 2021 and reflects Taiwan’s sound fiscal discipline, the Ministry of Finance said yesterday.
In its report, Fitch highlighted several key factors supporting the rating, including Taiwan’s significant net external creditor position, strong fiscal governance and competitive business environment, the ministry said.
Taiwan’s total tax revenue last year outperformed expectations, while government spending remained slightly below budget, resulting in a combined fiscal surplus (including special budgets) equal to 0.4 percent of GDP, the Fitch report said.
Photo: Fang Pin-chao, Taipei Times
For this year, Fitch forecast a marginal fiscal surplus, largely due to “revenue overperformance.”
It also projected a steady decline in the government’s debt-to-GDP ratio to about 27 percent by 2027 from 31 percent last year, “reflecting low deficits and decent economic growth,” the report said.
The ratings agency also lauded Taiwan for keeping public debt well below the ceiling of 50 percent of GDP, which serves as an anchor for maintaining midterm fiscal discipline.
In terms of Taiwan’s net external creditor position, Fitch described “Taiwan’s external balance sheet” as “among the strongest of Fitch-rated peers globally.”
Taiwan had a net external creditor position of 214 percent of GDP as of the end of last year, far higher than the “AA” median of 6.4 percent of GDP, and Fitch projected the country’s current account surplus to be about 15 percent of GDP from this year to 2027.
However, those numbers have hurt it in negotiating “reciprocal” tariff rates with the US, which has objected to Taiwan’s large trade surpluses — a key component of current account surpluses.
Although Fitch’s report on Taiwan’s fiscal position was positive, it pointed to the US tariffs as a potential impediment to growth.
“Growth forecasts for the second half of 2025 face large uncertainty, including the effect of US tariffs. These are currently set at zero for semiconductors, but are subject to a review under a Section 232 investigation by the US, while the ‘reciprocal’ rate is 20 percent,” the report said.
“Additional risks include a slowdown for key trading partners, reduced global AI [artificial intelligence] demand and geopolitical tensions. Medium-term growth prospects face headwinds from an aging population,” it said.
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