S&P: Despite Chip Fears, Taiwan's Economy Will Survive Quake

Just as PC-component manufacturers such as Hewlett-Packard Co. are beginning to report lower expected earnings due to Taiwan's recent earthquake, Standard & Poor's (S&P) credit rating service says the Sept. 21 disaster won't be all that bad for Taiwan itself. At least economically. The country's GDP growth will be limited, but in the medium term economic growth may well be stimulated by increases in infrastructure and construction spending, according to a report released the week by S&P. John Bailey and Xavier Chavee, Taipei-based analysts for S&P, wrote the report. "The added expenditure on infrastructure is unlikely to create financing problems for the government, since Taiwan has little foreign debt and its foreign reserves rank third in the world behind China and Japan," Bailey says, adding that to rebuild residential property and infrastructure, the government will rely on the issuance of government bonds and budgetary adjustments. The report does acknowledge the hit the computer industry, as well as the baking sector, will take from the quake, but says insurance companies will be less severely affected and in the longer term may benefit from increased demand. Damage to the key petrochemical and steel industries has been relatively limited. In contrast, some industries, such as steel, construction, and cement, stand to benefit in the aftermath of the earthquake as rebuilding gets under way. The full report is available on Ratings Direct, S&P's Internet-based credit research services.

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