Country Report Taiwan May 2009

Outlook for 2009-10

• The president, Ma Ying-jeou of the ruling Kuomintang (KMT), has seen his public popularity decline in recent months, but he has a strong mandate to govern, as the KMT also controls the Legislative Yuan (parliament).
• The controversy surrounding the negotiation of an economic co-operation deal with mainland China was highlighted in April, when legislators placed restrictions on the language that could be used in the final version of the pact.
• Ongoing concerns about the weakness of the economy will lead the Central Bank of China (Taiwan's central bank) to continue to make modest cuts in official interest rates during 2009.
• Signs of economic stability in some of the island's main export markets have prompted the Economist Intelligence Unit to revise its forecast for Taiwan's economy in 2009 to a contraction of 6.5% (from a 9.3% contraction previously).
• The New Taiwan dollar is forecast to weaken from an average of NT$31.5:US$1 in 2008 to NT$34.1:US$1 in 2010. However, the local currency will continue to experience moderate volatility against the US dollar, particularly in 2009.

Monthly review

• The possible signing of the economic co-operation agreement with China has continued to generate controversy in parliament, with members of the chamber voting to restrict the wording of any final pact.
• The legislature has also called upon the central government to strengthen Taiwans relationships with Japan and the US, in order to balance Taiwan's deepening ties with the Chinese mainland.
• In early April the KMT-dominated parliament approved the governments special public works budget for 2009, although the measure was trimmed by NT$1.5bn (US$19.5m) to a still substantial NT$149.1bn.
• Figures from the Ministry of Finance reveal that fiscal revenue fell by 19% year on year, to NT$245bn, in the first quarter of 2009, and the fiscal outlook for the next two to three years remains poor.
• Taiwans merchandise exports dropped by 35.7% year on year in March. However, the value of exports rose by 23.8% month on month, to US$15.5bn, the highest figure for four months.
• The broad money supply (M2), which includes currency in circulation, current-account and pass-book deposits, savings accounts and quasi-money, grew by 6.2% year on year in February, slowing from 7.2% in January.
• Opposition legislators have threatened to derail the governments attempts to shore up Taiwans troubled semiconductor industry.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47;70;15;37;53;49;2834;80;48;10
NAICS Code: 52;48;72;23;336;44;22;3254;62;517;212