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S&P cut Taiwan outlook “negative” on fiscal position

Posted on: April 15, 2009


Reuters – Wednesday, April 15

HONG KONG, April 14 – Standard & Poor’s cut its outlook on Taiwan’s ‘AA-minus’ credit ratings to ‘negative’ from ‘stable’ on Tuesday, saying the government’s fiscal position could worsen over the next two to three years.

Despite Taiwan’s strong external position, including more than $300 billion in foreign reserves and healthy current account surpluses, Taiwan still suffers from a “relatively high” government debt burden and a “weak” banking system, S&P said.

“The negative outlook reflects our expectation of a marked deterioration in the government’s fiscal position in the next two to three years and this could weaken its credit fundamentals below levels appropriate for the ‘AA’ rating category,” said Standard & Poor’s credit analyst Kim Eng Tan. [ID:n4466]

S&P noted that Taiwan’s general government debt stood at 142 percent of revenue, calling that among the highest in the ‘AA’ category, which is just below the top rating ‘AAA’.

The island’s weak banking system remains another concern, S&P said, noting that its fragmented nature and lower profitability could become a thorn should the economic downturn worsen.

“Among economies at similar levels of development, the Taiwanese banking system is considered less healthy than most.’ S&P said.

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