Country Report Taiwan December 2008

Summary

The president, Ma Ying-jeou of the ruling Kuomintang (KMT), has a strong mandate to govern, because the KMT also has control of the Legislative Yuan (parliament).
Following Mr Ma's election as president, Taiwan's relations with China have improved markedly. This relationship will continue to improve in the forecast period.
The government will use a combination of fiscal stimulus measures and an easing of monetary policy in order to support Taiwans trade-dependent economy.
The Central Bank of China (Taiwans central bank) made three emergency cuts in the key policy interest rates in October and November. Further emergency cuts are likely owing to the weak global outlook.
As a result of the rapidly deteriorating outlook for the global economy, the Economist Intelligence Unit has cut its growth forecast for Taiwan sharply. We now forecast that real GDP will contract by 2.9% in 2009.

On November 11th a former president, Chen Shui-bian, was arrested on suspicion of corruption. The arrest is a significant blow to the credibility of Mr Chen and is likely to further aggravate political tensions in Taiwan.
A former KMT vice-president, Lien Chan, met Chinese president Hu Jintao on the sidelines of a regional forum in November to discuss the possibility of Taiwan becoming an observer at the World Health Organisation.
The government has announced an emergency stimulus package worth NT$500bn (US$14.9bn) to boost economic growth. The package includes an eye-catching shopping voucher scheme and new public-works plans.
Taiwan's economy weakened sharply in the third quarter of 2008, as real GDP contracted by 1%, the first quarterly decline since 2003. Private consumption and investment were both particularly weak.
Taiwan posted a current-account surplus of US$2bn in the third quarter. This was substantially less than the US$6.5bn that was registered in the same quarter of 2007.
A number of indicators point to a further deterioration in economic activity: an industrial production index fell by 12.6% year on year in October, while the unemployment rate rose to a five-year high of 4.4% in the same month.

This report covers the following industry codes:
SIC Code: 49;65
NAICS Code: 22;53