Country Report Taiwan December 2009

Outlook for 2010-11

• The president, Ma Ying-jeou of the ruling Kuomintang (KMT), has a strong mandate to govern, as the party also controls the Legislative Yuan (parliament).
• Although Mr Ma's popularity has suffered recently, his policy of pursuing closer economic ties with mainland China continues to receive the cautious support of the majority of Taiwan's citizens, at least for the time being.
• Taiwan's efforts to join international bodies are now facing less opposition from mainland China than was previously the case, but China will remain cautious about allowing the island to expand its international presence.
• The postponement of trade talks between Taiwan and Chinese trade officials, which were due to take place in early November, suggests that a bilateral free-trade deal is unlikely to be finalised before the end of 2009.
• Forward-looking indicators of consumer confidence have improved in recent months. As a result, the Economist Intelligence Unit forecasts relatively strong real GDP growth during the next two years.
• In 2010-11 we forecast that inflation will remain low, the current account will post substantial surpluses and the exchange rate will remain stable as Taiwan's economy continues to recover from the recent downturn.

Monthly review

• The opposition Democratic Progressive Party has attacked the KMT over the issue of food safety. This follows the government's decision to lift the ban on bone-in beef imported from the US, despite fears about mad cow disease.
• At the annual Asia-Pacific Economic Cooperation (APEC) summit in Singapore in mid-November, the Chinese president, Hu Jintao, had a meeting with Taiwan's APEC envoy, Lien Chan, a former vice-president and KMT elder.
• Taiwan and China signed a long-awaited financial memorandum of understanding in mid-November. The agreement could lead to some Chinese financial institutions investing in the Taiwan stockmarket for the first time.
• Real GDP expanded at a seasonally adjusted quarter-on-quarter rate of 2% in the third quarter of 2009. On a year-on-year basis, however, the economy continued to contract.
• The economy showed further signs of recovery in October, when retail sales were up by 5.9% year on year—the fastest growth rate since January 2008. Industrial production also grew in October for the second consecutive month.

This report covers the following industry codes:
SIC Code: 60;89
NAICS Code: 52;81

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: In focus
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: The opposition attacks the KMT over food safety
• The political scene: APEC brings Taiwan and China together as equals
• Economic policy: China and Taiwan sign a financial sector agreement
• Economic policy: The central bank bans time deposits by foreign investors
• Economic performance: Taiwan's economic recovery continues in the third quarter
• Economic performance: Quality of life index: Taiwan
• Economic performance: Industrial production expands again in October
• Economic performance: Retail sales continue to recover
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure