Moody’s Investors Service changed its economic outlook for Taiwan from “positive” to “stable” on concern that rising tensions with China offset positive economic momentum, but kept its credit rating at “Aa3.”
“The decision to change the outlook reflects Moody’s assessment that cross-strait tensions have picked up, alongside rising strains in the relationship between China and the US,” Moody’s said on Thursday.
The affirmation of the “Aa3” rating came after considering Taiwan’s credit strength and challenges, and the assumption that Taiwan’s fiscal and external buffers will remain intact relative to similarly rated peers, it said.
Despite increasingly adversarial rhetoric in cross-strait relations, a direct military conflict between Taiwan and China remains a low-probability event, it said.
A military conflict would pose significant economic costs to the parties involved and to the global economy, Moody’s said.
The likely threat of economic sanctions imposed by China with negative consequences worldwide and the global consequences of a loss of access to Taiwanese electronic components are deterrents to a conflict, it added.
Taiwan’s inflation-adjusted GDP growth would remain above its potential at about 3 to 3.5 percent this year, slowing from 6.6 percent last year, Moody’s said, adding that it expects 2.5 percent growth on average in the coming years, higher than most economies.
Taiwan’s growth momentum is one of the least volatile among its peers despite its heavy reliance on external demand, thanks to its leadership in the information and communications technology sector, it said.
Taiwan maintains several competitive advantages in the technology sector, including the availability of trained engineers, geographic proximity to key supply chains and customers, and competitive wages and electricity costs, it said.
Globally, more than 90 percent of advanced semiconductor manufacturing capacity is in Taiwan, underscoring its critical role in spurring global investments in high-growth industries such as cloud infrastructure, electric vehicles, industrial automation, wireless telecommunications and high-performance computing, Moody’s said.
Over time, permanently heightened geopolitical risks would result in the acceleration of technology companies and other end users of advanced semiconductors seeking to relocate or replicate manufacturing capacity outside of Taiwan to fortify their supply chains, therefore weakening Taiwan’s economic strength, it said.
Longer-term concerns about Taiwan’s exposure to geopolitical risks have prompted governments to reassess their chip supply chains, Moody’s said.
Taiwan has maintained an overall prudent fiscal stance despite several rounds of stimulus to households and businesses, and a substantial increase in defense expenditure, it said.
Fiscal policy effectiveness continues to be supported by the government’s strong commitment to maintaining stable budget deficits through economic cycles, which has led to the successful execution of fiscal policy against planned targets, it said.
TRADE WAR: Tariffs should also apply to any goods that pass through the new Beijing-funded port in Chancay, Peru, an adviser to US president-elect Donald Trump said A veteran adviser to US president-elect Donald Trump is proposing that the 60 percent tariffs that Trump vowed to impose on Chinese goods also apply to goods from any country that pass through a new port that Beijing has built in Peru. The duties should apply to goods from China or countries in South America that pass through the new deep-water port Chancay, a town 60km north of Lima, said Mauricio Claver-Carone, an adviser to the Trump transition team who served as senior director for the western hemisphere on the White House National Security Council in his first administration. “Any product going
TECH SECURITY: The deal assures that ‘some of the most sought-after technology on the planet’ returns to the US, US Secretary of Commerce Gina Raimondo said The administration of US President Joe Biden finalized its CHIPS Act incentive awards for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), marking a major milestone for a program meant to bring semiconductor production back to US soil. TSMC would get US$6.6 billion in grants as part of the contract, the US Department of Commerce said in a statement yesterday. Though the amount was disclosed earlier this year as part of a preliminary agreement, the deal is now legally binding — making it the first major CHIPS Act award to reach this stage. The chipmaker, which is also taking up to US$5 billion
High above the sparkling surface of the Athens coastline, the cranes for building the 50-floor luxury tower centerpiece of Greece’s future “smart city” look out over the Saronic Gulf. At their feet, construction machinery stirs up dust. Its backers say the 8 billion euro (US$8.43 billion) project financed by private funds is a symbol of Greece’s renaissance after the years of financial stagnation that saw investors flee the country. However, critics see it more as a future “ghetto for the rich.” It is hard to imagine that 10km from the Acropolis, a new city “three times the size of Monaco”
STRUGGLING BUSINESS: South Korea’s biggest company and semiconductor manufacturer’s buyback fuels concerns that it could be missing out on the AI boom Samsung Electronics Co plans to buy back about 10 trillion won (US$7.2 billion) of its own stock over the next year, putting in motion one of the larger shareholder return programs in its history. South Korea’s biggest company would repurchase the stock in stages over the coming 12 months, it said in a regulatory filing on Friday. As a first step, it would buy back about 3 trillion won of paper starting today up until February next year, all of which it would cancel. The board would deliberate on how best to effect the remaining 7 trillion won of buybacks. The move
RSS