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Measures for maintaining fiscal stability

I. The establishment of multiple financial resource channels

1.Maintaining fiscal stability is the foundation of sustainable development for a nation and a long-term objective for our government. In response to policy demands and the promotion of infrastructure projects, the Ministry of Finance manages the national financial resources and has established multiple channels to raise funds adequately. With the measures of resource-broadening and cost-cutting at all levels of our government, the deficit of the Central Government General Budget and Special Budgets decreased to NT$13.6 billion in 2017, from NT$439.2 billion in 2009.

2.Moreover, thanks to the outstanding performance of the Central Government General Budget, there were surpluses of NT$16.5 billion and NT$16 billion in our annual budgets in 2018 and 2019, respectively. These surpluses were gained despite the introduction of the Forward-Looking Infrastructure Special Budget, which we funded for promoting national infrastructure. Due to the sudden COVID-19 pandemic outbreak in 2020, a special budget we funded in response, which has been expanded multiple times since. These expansions have inevitably led to the growth of the deficit in the short term. The annual budget deficit, including the four expansions of the COVID-19 special budget proposals, amounted to NT$277.3 billion in 2020 and is projected to be NT$691 billion in 2021. Without the COVID-19 pandemic, our fiscal condition would have continued its positive path. Nonetheless, the situation has been improved and the deficit is expected to be further reduced as the global economy gradually recovers and our tax revenues surpass expectations.

II. Debt ratio management

In recent years, the fiscal situation of the Central Government has been improved gradually. The ratio of outstanding debt with a maturity of one year or more incurred by the Central Government to the average of nominal GDP for the previous 3 years has decreased from a peak of 36.3% in 2012 to 29.6% in 2019, showing a 7-year successive decline. However, due to the sudden COVID-19 pandemic outbreak in 2020 and 2021, the special budget is response to this pandemic has been expanded multiple times. The debt to GDP ratio slightly increased to 30% in 2020 and is projected to grow to 33.5% in 2021, which is still under control and lower than the debt ratios of most other countries. Moreover, without the pandemic, the ratio would have continued to decline, showing the effectiveness of our government debt management. We will continue to manage debt in accordance with The Budget Act, The Public Debt Act, and The Fiscal Discipline Act so as to maintain fiscal stability.

III.International analysis

1. Debt management is reasonable in our country
Our central government’s debts that mature in more than one year as a percentage of GDP were 28.43% in fiscal year 2019, 28.01% in fiscal year 2020, and 29.04% in fiscal year 2021. Compared to the United States’ 92.57% (2019), Great Britain’s 84.39% (2019), Germany’s 37.69% (2019), and Japan’s 201.39% (2019), our government debt management appears stable and reasonable.

2. International credit evaluation agencies have given our nation high evaluations

(1)In order to achieve the goals of economic growth and sustainable financial development, we have been promoting relevant measures, such as restructuring expenditures and establishing multiple channels for the cultivation of financial resources, so as to further shrink our deficit as well as control the scale of our debt. The World Economic Forum (WEF) announced in "The Global Competitiveness Report 2019" that Taiwan ranks 12th of the 141 economies rated. In "Debt dynamics," under the category of "Macroeconomic stability," Taiwan tied for first place with 33 other economies. According to the “World Competitiveness Yearbook 2021,” which was released by the Institute for Management Development (IMD) in Switzerland, Taiwan ranked 8th among 64 rated economies, moving up 3 places compared to the previous year, and ranked 3rd in the Asia-Pacific region. 

(2)Moody's Investors Service on February 24th, 2021 affirmed Taiwan’s long-term issuer rating at “Aa3” and changed the outlook to “positive” from “stable”. Standard & Poor’s Global Ratings on April 22th, 2021 raised the long-term issuer credit rating on Taiwan to “AA” from “AA-,” a positive outlook. Fitch Ratings on September 10th, 2021 upgrades Taiwan’s long-term foreign-currency Issuer Default Rating and Country Ceiling to “AA” and “AAA” from “AA-“ and ‘”A+”, a stable outlook. The above international credit evaluation agencies have affirmed Taiwan’s excellent fiscal performance by demonstrating a prompt and effective economic recovery in the pandemic while abiding by the relevant loan-cap fiscal rules stipulated in The Public Debt Act, effectively assuring a rapid economic revitalization back to its normal track amid the pandemic and showing that Taiwan has a more resilient fiscal capacity than many of its Aa-rated peers when faced with unforeseen sudden impacts.

Issued:Dept. of Planning Release date:2021-10-12 Last updated:2021-10-15 Click times:569