Taiwan's Sovereign Rating Remains ‘A+' for 2014: Fitch

The U.K.-based Fitch Ratings Ltd. lately affirmed Taiwan's sovereign credit rating of “A+” for the third year in a row and maintained its “A+” and “AA-” long-term foreign and local currency issuer default ratings respectively for the island with a stable outlook.

Taiwan's healthy finance and solid foreign exchange reserves are believed key factors for achieving such high ratings. Fitch indicates that Taiwan's net external asset position was 150% of GDP in 2013, compared with the median of 14% for the ‘A' rating; and net sovereign foreign currency assets, mainly reflecting forex reserves covering more than 15 months of current external payments, were equal to 89% of GDP, while the rating median is 15%. Besides, Taiwan's current account surplus reached 11.7% of GDP in 2013, higher than the average 10.4% of the last five years despite a marked slowdown in export growth.

Taiwan's public finances also pose no risk to the nation's credit profile compared with its peers, Fitch said. In 2013 Taiwan's gross general government debt (GGGD) and deficit to GDP ratios were in line with the ‘A' median at 49.8% and 1.9%, respectively. And the government has announced to lower the GGGD over GDP ratio to 40% in 2023 and press the deficit over GDP ratio down to below 1% in 2016.

Taiwan has recently had a mixed macroeconomic performance and its inflation is low and stable, Fitch pointed out, adding Taiwan's unemployment has declined from its 5.8% peak in 2009 to 4.2% in 2012 and 2013, although GDP growth was only 2.1% in 2013, below the five-year average of 3.3%.

Fitch sees no substantial changes in Taiwan-China relationship and believes in a continued high level of political stability, with no major political or social disruptions to affect the business environment on the island. However, the exposure risk of Taiwan's banks with China has been rising since 2010, with the exposure position having risen to US$90 billion, for 7% of the total assets held by domestic banks in Taiwan. (JL)