Taiwan's growth prospects have improved as a result of closer trade integration with China, while many of its rating peers are undergoing major structural adjustment processes.
The stable outlook incorporates the fact that the likely resumption of fiscal consolidation is balanced by the considerable headwinds to growth posed by an uncertain external environment.
In its just-released annual assessment of Taiwan, Moody's evaluates four factors on a scale which include "very high," "high," "moderate," "low,"and "very low."
For economic strength, it assesses the country as "very high to high"; for institutional strength "high"; for government financial strength "high"; and susceptibility to event risk "moderate to low."
The Moody's report notes that strength of the government's crisis management suggests an appropriate degree of policy flexibility that has reinforced Taiwan's resilience to large external shocks.
While the country's debt has risen over the past three years, prompting concerns of a political nature related to the debt ceiling, the fiscal authorities have responded with measures aimed at narrowing deficits and boosting competitiveness.
Moreover, Taiwan's very strong external position and high savings rate allow it to meet its borrowing requirements entirely in local currency and at a very low cost. The government's cost of raising funds remains under control, while deficits are likely to be easily finance-able over the next 12 to 18 months.
While its event risks are manageable, the catastrophic March earthquake in Japan underscores the vulnerabilities related to Taiwan's energy mix, although the latter is not as heavily dependent on nuclear energy.
Geopolitical risks stemming from Taiwan's relationship with China appear to have receded, while a potential correction to the ongoing run-up in property prices poses limited risks to the government's balance sheet.
The report is entitled "Credit Analysis: Taiwan." It can be found at www.moodys.com
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.