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Bond Market News
Taiwan Upgraded To AA By S&P
April 23, 2021
Taiwan’s long-term issuer rating has been upgraded to AA from AA- with a positive outlook by S&P prompted by the nation’s effective response to the ongoing pandemic, strong net external asset position and competitive private sector enabled economic growth to accelerate in 2020 despite COVID-19. In 2020, Taiwan’s economy bucked the world trend and grew by 3.1% vs 3.0% in 2019 taking it much ahead of its peers. The growth is expected to increase to 4.2% in 2021 improving per capita GDP to $30,900. The economic activity was uplifted by the electronic sector especially the semiconductor industry which manufactures high-end integrated circuits. The positive economics has also led to lower government borrowing costs. The net general government debt is expected to reach 33% of GDP in 2021 as Taiwan ran a smaller fiscal deficit last year. While considering the positive economic performance of the sovereign, the rating agency also raised a concern on the recent cross-strait tensions which have increased the geopolitical risk. The rating agency said that “Taiwan has demonstrated one of the most successful pandemic responses, allowing the government to avoid stringent lockdown measures. The competitive export sector also benefited from the global shift toward remote working and the attendant strong demand for information technology products. These trends enabled the economy to outperform even its pre-pandemic trajectory. Due to years of well-managed fiscal position, strong domestic liquidity and low interest rates, the government’s debt-servicing costs have declined substantially.”
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