Moody's Upgrades Outlook

Moody's has affirmed the Taiwan's Aa3 rating and changed the outlook to positive from stable.

• Moody's says the decision to change the outlook to positive reflects increasing signs that Taiwan's economy is more resilient and that its governance strength is stronger than previously assessed. They also note the high-tech, export-oriented manufacturing sector is likely to boost Taiwan's competitiveness in the medium term, as changes in behaviors and work practices, underway before the pandemic and accelerated by it, continue to boost demand for its goods in the medium term.
• After expanding by 3.1% in 2020, Moody's expects Taiwanese real GDP growth to accelerate in 2021 to 3.7%, as external demand among the country's trading partners is gradually lifted jointly by effective vaccination campaigns and continued easing of movement restrictions, and robust investment flows into Taiwanese supply chains that will maintain their competitive edge in semiconductor manufacturing and continue to enhance the economy's resiliency.
• Moody's said it would consider upgrading Taiwan's rating amid increasing evidence that the economy's competitiveness and resiliency continues to increase. Such an occurrence may occur alongside successful execution of the government's ongoing economic and structural reforms, which would durably improve potential growth levels. This would likely entail effective improvements in physical infrastructure and investment climate and may denote yet stronger governance than currently assessed.
• On the downside Moody's would consider downgrading Taiwan's rating amid a flare-up in relations with China that precipitated material risks to Taiwan's credit fundamentals.