Taiwan Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Taiwan Country Risk Report
Product Price
$1,195.00

Core Views

  • Taiwan's 2015 real GDP growth came in at 0.9%, slightly below our forecast of 1.0%. Ongoing weakness in the Chinese economy coupled with continued uncertainty in the domestic political situation will continue to weigh on Taiwan's economic growth. However, we expect business sentiment to improve gradually in H216 as the political situation stabilises, leading to a slight improvement in growth figures. As such, we forecast 2016 real GDP forecast to come in at 1.5%.

  • Taiwan's opposition Democratic Progressive Party (DPP) won a landslide victory in both the presidential and parliamentary elections held on January 16. With the pro-independence DPP having yet to fully articulate its cross-Strait policy, we expect political risks to remain high, undermining investor confidence. President-elect and DPP leader Tsai Ing-wen also faces an uphill task in boosting the island's ailing economy.

  • We maintain our forecast for two interest rate cuts by the CBC in 2016 following the surprise 12.5bps rate cut on December 16, which took the discount rate to 1.625%. Continued export headwinds and low inflation will prompt the CBC to cut rates in a bid to support growth and keep the Taiwan dollar competitive, and we expect the central bank to take its benchmark rate to 1.375% by the end of 2016.

  • Taiwan's modest stimulus package aimed at supporting growth through boosting domestic spending will have a limited effect on the country's growth, which will continue to be hampered by stiff export headwinds as well as domestic political instability. The size of the package is also unlikely to have a significant impact on the 2016 fiscal deficit, which we forecast to come in at 1.6% of GDP.

  • Despite its strong fundamentals, the TWD is facing downside pressure from the ongoing weakness in the Chinese economy as well as domestic uncertainty. As such, we see continued weakness in the near term, with the currency ending 2016 at TWD34.30/USD. Over the long-term, an undervalued real effective exchange rate and a large current account surplus will lend support to the currency, limiting weakness and providing stability.

Major Forecast Changes

  • With external headwinds and domestic political uncertainty likely to persist, we have downgraded our 2016 and 2017 real GDP forecasts to 1.5% and 2.3%, respectively (from 1.9% and 3.5% previously), to reflect these challenges.

  • We are downgrading our 2016 end-year forecast to TWD34.30/USD from TWD32.00/USD to reflect the likelihood that the central bank will weaken the currency to support exports.

Key Risks

  • Downside Risks To Growth Forecast: Should we see a re-emergence of a crisis in the eurozone, a slower than expected US recovery or a downward spiral in China's economy, we can expect Taiwan to head into a sharp recession.

Macroeconomic Forecasts (Taiwan 2014-2017)
Indicator 2014 2015e 2016f 2017f
National Sources/BMI
Nominal GDP, USDbn 530.3 509.9 483.3 500.4
Real GDP growth, % y-o-y 3.7 1.0 1.5 2.3
Consumer price inflation, % y-o-y, eop 0.6 -0.1 1.6 2.0
Exchange rate TWD/USD, eop 31.66 32.86 34.30 34.50
Budget balance, % of GDP -0.9 -1.5 -1.6 -1.6
Current account balance, % of GDP 12.6 12.6 13.7 14.0
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
China Strategy In Flux As Elections Approach
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
10
Legal Status Quo To Prevail In 2010s
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Downgrading Growth Amid Export Headwinds
14
TABLE: Economic Activity
14
Fiscal Policy
15
Capital Gains Tax To Cool Housing Market Further
15
TABLE: Fiscal Policy
15
Monetary Policy
16
Monetary Policy To Remain Accommodative
16
TABLE: Monetary Policy
17
Exchange Rate Forecast
18
TWD: Near-Term Weakness; Long-Term Stability
18
TABLE : BMI CURRENCY FORECAST
18
TABLE: Current Account
19
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Contents
Contents
Chapter 3: 10-Year Forecast
21
The Taiwan Economy To 2024
21
Multiple Headwinds Against Structural Growth
21
TABLE: Long-Term Macroeconomic Forecasts
21
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
TABLE: Operational Risk
26
Market Size And Utilities
27
TABLE: Asia - Market Size & Utilities Risks
28
International Security Risk
32
TABLE: Asia - Interstate Security Risk
32
Chapter 5: Key Sectors
35
Pharmaceuticals & Healthcare
35
TABLE: Pharmaceutical Sales, Historical Data & Forecasts
36
TABLE: Healthcare Expenditure Trends, Historical Data & Forecasts
37
Telecommunications
38
TABLE: Telecoms Sector-Historical Data & Forecasts
39
Other Key Sectors
43
Table: Oil & Gas Sector Key Indicators
43
Table: Autos Sector Key Indicators
43
Table: Infrastructure Sector Key Indicators
43
Table: Defence & Security Sector Key Indicators
44
Table: Food & Drink Sector Key Indicators
44
Table: Freight Key Indicators
44
Chapter 6: BMI Global Macro Outlook
45
Global Outlook
45
Assessing The Aftermath Of Three Key Events
45
Table: Global Assumptions
45
Table: Developed States, Real GDP GrowtH, %
46
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
46
Table: Emerging Markets, Real GDP Growth, %
47

Assess your risk exposure in Taiwan with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Taiwan with confidence.

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