Fitch Ratings yesterday retained its negative outlook on Taiwan’s AA long-term local currency rating on lingering concerns over the nation’s deteriorating fiscal condition and weaker economic recovery compared with other emerging economies in the region.
The UK-based agency early last year lowered its outlook rating on Taiwan to negative from stable, in view of the nation’s increasing public debt and declining tax revenue after the government adopted measures to mitigate the effects of the global financial crisis.
“We retain the rating on Taiwan because of its weak fiscal outlook,” Vincent Ho (何永燊), associate director on Fitch’s Asia-Pacific sovereign ratings team, told a conference in Taipei.
The government’s debt is rising while tax revenue is shrinking and fiscal consolidation in the medium term may not be credible, Ho said.
To stimulate the economy, Taiwan has since January last year cut inheritance tax to a flat 10 percent from a range of 2 percent to 50 percent and recently lowered corporate income tax from 25 percent to 17 percent.
Meanwhile, the government has raised debt to finance infrastructure expansion and assorted welfare programs for the disadvantaged and the unemployed.
Taiwan’s public debt is approaching its legal limit, as government expenditure remains high, while tax revenues have shown little improvement since emerging from global recession, Ho said.
The analyst expects the nation’s economy to expand by 7.9 percent this year, from a contraction of 1.9 percent last year, but noted that its five-year average performance hovers slightly above 3 percent, slower than emerging Asia’s median of more than 5.5 percent.
Fitch also retained its “A+” stable outlook on Taiwan’s foreign currency rating on strong external finances attributing to robust exports, the report showed.
The current-account surplus continues to boost the nation’s foreign-exchange reserve accumulation, which has reached more than 130 percent of GDP, the report said.
However, Ho voiced concern that high unemployment in the US and Europe may weaken demand for Taiwanese electronics, casting uncertainty on the nation’s economic prospects.
“While a global double-dip is unlikely, risks remain because Fitch hasn’t bought into Asian decoupling yet,” Ho said, referring to the argument that Asia has become independent from the West in shoring up its economy.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary