Taiwan won a vote of confidence from Moody’s Investors Services Oct. 22 after its sovereign credit rating was left unchanged at Aa3 on the strength of strong fiscal fundamentals and economic resilience.
The country’s stable outlook was also maintained by the international ratings agency, which cited solid government financials, a sound institutional framework and low to moderate susceptibility to risk.
“While Taiwan’s government debt levels have risen in the past few years, prompting concerns over its government debt ceiling, the authorities have responded with measures aimed at narrowing its deficits through an expansion of government revenues,” Moody’s said in a statement.
“Nevertheless, Taiwan’s public debt ceiling or total indebtedness is low when compared with many industrialized nations,” it added.
The ROC Ministry of Finance welcomed Moody’s assessment, stating that it reflects well on the government’s commitment to developing the local economy while keeping a healthy balance sheet.
“We will continue implementing measures and strategies for effective budget control to improve the country’s fiscal performance,” an MOF official said.
Although Moody’s is bullish on Taiwan’s prospects, it expects European debt woes and decelerating growth in mainland China to impact local business activity for the rest of the year.
“We believe its trade-dependent economy will start to recover in early 2013, in line with our projections of growth for many of Taiwan’s key export markets,” the international ratings agency said.
Moody’s views cross-strait economic integration as having boosted Taiwan investment and tourism, as well as reducing cross-strait tensions. But it warns that highly polarized local politics could hamstring this trend, dimming the prospects of fast-tracking further economic reform.