Monday, March 27, 2006

Downside Risks for Taiwan in the future

Fitch expects Taiwan's growth to slow this year, as do several similar projections.

The agency’s concern centres on the recent fall in export growth, while it also notes consumption is showing signs of declining.

This partly reflects rising personal debt levels as Taiwan goes through a credit card crisis similar to that experienced by South Korea a few years ago, but the company suggests there is unlikely to be any resultant decline in the country’s debt rating.

The fact Taiwan is a net external creditor, meaning the rest of the world owes it money rather than the other way around, is supportive for its rating in the company’s view, as is the country’s strong balance of payments position. One area of concern though in the agency’s view is the rising level of government debt.

Basically, growth is expected to be 4%, but the risk is that it could fall, not go up. I think it is neat to note that Taiwan is a net creditor to the rest of the world.

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