Fitch affirms Taiwan's 'AA' rating; outlook stable

Taipei, Aug. 6 (CNA) Fitch Ratings maintained Taiwan's long-term sovereign credit rating at "AA" in its latest report on Tuesday, a rating that has remained unchanged since 2021 and reflects Taiwan's sound fiscal discipline, the Ministry of Finance (MOF) said Wednesday.

In its report, Fitch highlighted several key factors supporting the rating, including Taiwan's significant net external creditor position, strong fiscal governance, and competitive business environment, the MOF said.

In 2024, Taiwan's total tax revenue outperformed expectations while government spending remained slightly below budget, resulting in a combined fiscal surplus (including special budgets) equal to 0.4 percent of GDP, the Fitch report said.

For 2025, Fitch forecast a marginal fiscal surplus, largely due to "revenue overperformance."

It also projected a steady decline in the government's debt-GDP ratio to about 27 percent of GDP by 2027 from 31 percent in 2024, "reflecting low deficits and decent economic growth," the report said.

The credit ratings agency also lauded Taiwan for keeping public debt well below the ceiling of 50 percent of GDP, which serves as an anchor for maintaining mid-term fiscal discipline.

In terms of Taiwan's net external creditor position, Fitch described "Taiwan's external balance sheet" as "among the strongest of Fitch-rated peers globally."

It had a net external creditor position of 214 percent of GDP as of the end of 2024, far higher than the "AA" median of 6.4 percent of GDP, and Fitch projected Taiwan's current account surplus to be around 15 percent of GDP from 2025 to 2027.

Those numbers, however, have hurt it in negotiating tariff rates with the United States, which has objected to Taiwan's large trade surpluses -- a key component of current account surpluses.

Though Fitch's report on Taiwan's fiscal position was positive, it pointed to the U.S. tariffs as a potential impediment to growth.

"Growth forecasts for 2H25 face large uncertainty, including the effect of U.S. These are currently set at zero for semiconductors, but are subject to a review under a Section 232 investigation by the U.S., while the "reciprocal" rate is 20 percent," the report said.

"Additional risks include a slowdown for key trading partners, reduced global AI demand and geopolitical tensions. Medium-term growth prospects face headwinds from an aging population."