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Fitch upgrades ratings on Taiwan; outlook stable.

Fitch Ratings, one of the world's leading rating agencies, has upgraded Taiwan's ratings, in reflection of the country's efforts to steadily improve its fiscal strength despite slower economic growth. In the latest report, Fitch said it has raised Taiwan's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to AA- from A+. The ratings agency said that the outlook for Taiwan is stable.

It is the first time Fitch has upgraded Taiwan's Long-Term Foreign Currency rating since November 2011. In addition, the issue ratings on Taiwan's senior unsecured local-currency bonds have also been upgraded to AA- from A+, while the Country Ceiling is revised to AA+ from AA, Fitch said. The Short-Term Local-and Foreign-Currency IDRs have been affirmed at F1+, according to the rating agency. Fitch said that although Taiwan's real gross domestic product for 2015 slowed to only 0.65 percent, the general government balance still showed a surplus of 0.1 percent of the GDP that year.

Due to the efforts to keep its fiscal profile sound, the government saw its first fiscal surplus in almost 20 years, Fitch said. The agency said that the budget balance in 2016 is expected to remain robust, in reflection of strong tax revenue and prudent expenditure management. According to Fitch's estimate, Taiwan's budget deficit will account for 0.7 percent of its GDP in 2016, lower than an earlier forecast of 1.2 percent, due to efforts to keep public debt dynamics on a modest downward trend.

Fitch said that although cross-Taiwan Strait ties have been cooling since the pro-independence Democratic Progressive Party took power May 20, economic activity has continued, and is unlikely to have an impact on Taiwan's sovereign ratings. "Fitch believes that further rapprochement over the rating horizon is unlikely, but existing economic and trade linkages will continue to operate uninterrupted," the rating agency said in a statement.

Taiwan's economy has faced threats from rising competition from China, which has been gearing up to build its own supply chain, Fitch said. It said that Taiwan's GDP will grow 1 percent in 2016, below a forecast of a 1.22 percent increase by Taiwan's Directorate General of Budget, Accounting and Statistics. The country's economic momentum is expected to pick up in 2017 and 2018, when GDP could grow 1.5 percent and 2 percent, respectively. Taiwan's central bank stopped an interest rate cut cycle in a policymaking meeting held in late September by leaving its key interest rates unchanged, and Fitch said that the central bank is expected to continue to keep liquidity ample for some time.

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Publication:Taiwan News (Taipei, Taiwan)
Date:Mar 26, 2018
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