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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  • 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 economy contracted by 0.8% y-o-y in Q116, marking the third straight quarterly decline and extending the country's technical recession. Despite the transitory pick up in the Chinese economy, continued political uncertainty and a host of other domestic factors suggest that growth is unlikely to pick up until H216. With Q116 data coming in weaker than expected, we have downgraded our 2016 real GDP forecast slightly to 1.2% (from 1.5% previously).

  • With Taiwanese president-elect Tsai Ing-wen having yet to fully articulate her China policy, Beijing has attempted to influence the formulation of Taiwan's cross-Strait policy by alternating between promises of economic growth and diplomatic threats. However, these measures are unlikely to yield significant results as Tsai focuses on establishing her government ahead of her installation on May 20. We therefore expect cross-Strait ties to remain somewhat strained over the coming months, and note that the CSSTA is unlikely to be ratified anytime soon.

  • In line with our expectations, the CBC cut its discount rate by 12.5bps to 1.50% during its monetary meeting on March 24. We maintain our forecast for one more interest rate cut in 2016, which will take the benchmark rate to 1.375% by end-2016 as continued export headwinds and low inflation prompt the CBC to cut rates in a bid to support growth and keep the Taiwan dollar competitive.

  • The lifting of housing restrictions by the central bank will be insufficient to boost the domestic housing market, which will continue to face headwinds following the aftermath of a deadly earthquake and the implementation of housing-related capital gains taxes. With housing-related taxes accounting for a not 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.

  • The TWD has rebounded considerably since the beginning of the year in line with the broad-based weakening of the US dollar. With the currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average 2016 forecast to TWD32.50/USD from TWD34.3.0/USD previously. Over the long-term, an undervalued real effective exchange rate and a large current account surplus will lend support to the TWD, leading to gradual strength.

Major Forecast Changes

  • With Q116 data coming in weaker than expected, we have downgraded our 2016 real GDP forecast slightly to 1.2% (from 1.5% previously).

  • With the currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average 2016 forecast to TWD32.50/USD from TWD34.3.0/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 530.8 525.8 520.9 559.7
Real GDP growth, % y-o-y 3.9 0.8 1.2 2.3
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 12.6 14.5 13.5 13.1
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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