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

  • We are downgrading Taiwan's 2016 real GDP forecast slightly to 0.7% from 0.9% previously as continued export headwinds due to the slowdown in China and a host of other domestic factors continue to weigh. However, accommodative monetary policy will lend a degree of support, limiting downside potential.

  • Taiwan's rejection of the Permanent Court of Arbitration's July 12 ruling on the Spratlys is a step back in the island's efforts to increase engagement with the international community by abiding by international rules. The many similarities in Taiwan's South China Sea position and that of the mainland could also further complicate already challenging cross-Strait ties while potentially undermining Taiwan's Southbound policy as its refusal to comply with the ruling leads to strained relations with Southeast Asia.

  • In line with our expectations, the CBC cut its discount rate by 12.5bps to 1.375% during its monetary policy meeting on June 30. Given the CBC statement, we now forecast an additional interest rate cut of 12.5bps, which will take the benchmark rate to 1.25% by end-2016 as the central bank seeks to support growth and keep the Taiwan dollar competitive.

  • Falling house prices in Taiwan's major cities are unlikely to lead to a significant pick up in housing market transactions as the economy's slowing growth outlook and still-high house prices continue to weigh. With housing-related taxes accounting for a non-insignificant proportion of government revenue, we maintain our forecast for the government's 2016 fiscal deficit to come in at 1.6% of GDP as housing-related revenues fall short.

  • We have upgraded our average 2016 TWD forecast slightly to TWD32.40/USD from TWD32.80/USD previously on the back of attractive technicals and the increased likelihood of further US dollar weakness. Over the long-term, we expect gradual strength as an undervalued real effective exchange rate, increasing reserves, and a large current account surplus lend support to the TWD.

Major Forecast Changes

  • We have downgraded our 2016 real GDP forecast slightly to 0.7% (from 0.9% previously) to reflect ongoing economic headwinds.

  • With the currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average 2016 forecast slightly to TWD32.40/USD from TWD32.80/USD previously.

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 530.8 525.8 526.2 561.8
Real GDP growth, % y-o-y 3.9 0.8 0.7 2.0
Consumer price inflation, % y-o-y, eop 0.6 -1.2 1.6 2.0
Exchange rate TWD/USD, eop 31.66 32.86 32.30 31.50
Budget balance, % of GDP -0.9 -1.5 -1.6 -1.6
Current account balance, % of GDP 11.8 14.4 14.0 13.8
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
No Pick Up Until H216
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
10
TABLE: PRIVATE CONSUMPTION FORECASTS
10
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
10
Fiscal Policy And Public Debt Outlook
11
Lifting Of Restrictions Insufficient To Boost Housing Market
11
Structural Fiscal Position
12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
12
Monetary Policy
13
Easing Cycle Not Over Yet
13
Monetary Policy Framework
14
FX Forecast
15
TWD: Gradual Appreciatory Bias Due To Solid Balance Sheet
15
TABLE: BMI CURRENCY FORECAST
15
Outlook On External Position
17
TABLE: MAIN IMPORTS AND EXPORTS
17
TABLE: MAIN IMPORT AND EXPORT PARTNERS
17
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
17
Chapter 2: 10-Year Forecast
19
The Taiwan Economy To 2025
19
Multiple Headwinds Against Structural Growth
19
TABLE: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 3: Political Outlook
23
SWOT Analysis
23
BMI Political Risk Index
23
Domestic Politics
24
Cross-Strait Ties To Remain Strained
24
TABLE: POLITICAL OVERVIEW
24
Long-Term Political Outlook
26
Legal Status Quo To Prevail Into The 2020s
26
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: OPERATIONAL RISK
30
Economic Openness
31
TABLE: TOP 5 IMPORT PRODUCTS & IMPORT PARTNERS, 2010-2014, USDMN
31
TABLE: FREE TRADE AGREEMENTS
32
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
33
Availability Of Labour
36
TABLE: ASIA - AVAILABILITY OF LABOUR RISK
37
TABLE: LABOUR FORCE EMPLOYMENT BY SECTOR ('000), 2006-2012
38
Chapter 5: BMI Global Macro Outlook
41
Global Macro Outlook
41
Tentative Stability, But New Risks Emerging
41
TABLE: GLOBAL ASSUMPTIONS
41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
43
TABLE: MACROECONOMIC DATA & FORECASTS
45

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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