S&P Global Ratings on Friday raised its long-term issuer credit ratings for Taiwan to AA+ from AA, saying that the outlook for the country’s economic performance was favorable, based on robust demand for its electronics exports.

The American credit rating agency also maintained its short-term issuer credit ratings for Taiwan at A-1+.

It was Taiwan’s second S&P upgrade in a year and the first time since 2001 that it was given an AA+ rating, according to a statement issued by the agency.

S&P said the Taiwan ratings were anchored by the country’s strong external position and robust economic support.

“The COVID-19 pandemic has accelerated digitization globally and increased demand for Taiwan’s semiconductor exports,” S&P said in its annual report.

While rising geopolitical tensions pose headwinds for Taiwan’s export-reliant economy, they are unlikely to derail growth in its competitive manufacturing sector, according to S&P.

The agency said the stable outlook and the higher ratings reflected its assumption that cross-strait relations would not seriously disrupt Taiwan’s economic stability over the next three to five years.

Taiwan is expected to maintain healthy fiscal metrics over the next three to five years, as its prudent fiscal management, strong domestic liquidity, and low debt-servicing costs contribute to the government’s fiscal strength, S&P said.

It said, however, that Taiwan’s fiscal deficit for 2021 is expected be 3.6 percent of GDP, while the deficit for 2022 will narrow to 1.5 percent of GDP, taking into account the impact of Taiwan’s COVID-related special budget and two other special budgets in recent years to boost military procurement and defense capabilities.

Commenting on the S&P report, Taiwan’s Ministry of Finance said it will reduce taxes on commodities and implement relief measures to facilitate economic growth and deal with rising inflation, which is being caused by the Russia-Ukraine war and the global pandemic.

At the same time, the ministry said, it will exercise prudent management and propose appropriate tax reforms to maintain fiscal discipline and flexibility.

Source : Focus Taiwan News Channel