Country Report Taiwan July 2009

Summary

The president, Ma Ying-jeou of the ruling Kuomintang (KMT), has a strong mandate to govern, as the KMT also controls the Legislative Yuan (parliament).
There is pressure within the main opposition Democratic Progressive Party (DPP) for its leadership to adopt a less uncompromising approach on relations with China, but any change in the party's stance on the issue will be minor.
Efforts to expand cross-Strait links will continue, with the primary aim being to sign an Economic Co-operation Framework Agreement (a de facto free-trade agreement).
On June 25th the Central Bank of China (CBC, Taiwan's central bank) left the discount rate unchanged. It will maintain an accommodative monetary policy stance until there are clearer signs of sustained economic recovery.
The composite index of leading economic indicators, which forecasts conditions over the next three to six months, has reinforced the Economist Intelligence Unit's view that Taiwan's economy remains weak.
Our view that Taiwan will experience modest deflationary pressures in 2009 is reinforced by the fact that the consumer price index fell by 2% year on year in June, driven by falls in all major subindices.

In recent weeks influential members of the DPP have begun to question the party's hostile stance towards economic exchanges and broader engagement with mainland China.
Despite diplomatic constraints, there is growing support in Congress (the US legislature), which tends to take a harder line towards China than the administration of the US president, for the sale of fighter aircraft to Taiwan.
Tentative signs of stabilisation in Taiwan's recession-hit economy and elsewhere in the industrialised world have persuaded the CBC that further monetary loosening is not necessary.
Several economic indicators have pointed to a slight easing of Taiwan's deep economic recession during the second quarter of 2009, following a 10.2% year-on-year contraction in real GDP in the first quarter.
Taiwan's merchandise exports fell for the ninth consecutive month in May, registering a 31.4% year-on-year contraction in US dollar value terms.
Despite the severity of the economic downturn, Taiwan's stockmarket has performed well so far in 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;49;60;53;59;48;2834;80;1;70
NAICS Code: 336;22;52;44;517;3254;62;11;72