Taipei: S and P Global has affirmed its “AA+” long-term and “A-1+” short-term credit ratings for Taiwan, stating that geopolitical unease is not expected to affect the local manufacturing sector’s development over the long run. The ratings agency noted that Taiwan’s outlook over the long term remains stable, highlighting its expectation that structural demand for Taiwan’s semiconductor exports will likely offset growth issues associated with longstanding geopolitical tensions and evolving trade settings over the next 24 months.

According to Focus Taiwan, S and P maintained its ratings based on Taiwan’s “robust external position” and “strong economic support.” Despite uncertainties related to global trade, Taiwan is anticipated to benefit from strong export performance amid advancements in the information technology sector. Taiwan’s growth prospects are expected to outpace those of peers at a similar income level.

The agency observed that while Taiwan’s spending on defense and social benefits has risen and is likely to continue growing, the country’s fiscal settings remain healthy, supported by strong revenue growth. Ample domestic liquidity and low debt-servicing costs further contribute to Taiwan’s fiscal strength. S and P also expressed confidence that cross-strait ties with China will not deteriorate into a major military conflict, given the close economic and trade relationships between the two.

Taiwan’s monetary flexibility is considered strong by S and P, which praised the central bank’s sound monetary management that has kept inflation low and stable, despite ample liquidity in the system. The relatively flexible exchange rate and the active trading of the new Taiwan dollar help cushion economic and financial shocks.

The United States imposed a 32 percent “reciprocal” tariff on Taiwan on April 2 but announced a 90-day pause with a 10 percent baseline tariff remaining. S and P commented that the initial tariffs could significantly impact Taiwan’s growth due to its export-oriented economy, as 18 percent of its trade is with the U.S. However, the ratings agency believes Taiwan’s credit metrics have sufficient buffers against such an economic shock. Taiwan’s leadership in advanced chip manufacturing moderates the impact of U.S. tariffs, as importers have limited scope to diversify their supplier base.

S and P praised Taiwan’s electronics manufacturing sector, noting its strong position to benefit from long-term developments in the technology-intensive integrated circuit industry. The sector is poised to capitalize on sustained demand for chips driven by artificial intelligence, high-performance computing devices, 5G network deployment, big data processing and analytics, and electric vehicle development.