Country Report Taiwan November 2008

Outlook for 2009-10

• 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).
• China's relatively muted response to Taiwan's announcement that it was to purchase weapons from the US suggests that the relationship across the Taiwan Strait has matured since Mr Ma took office.
• The government is likely 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 (CBC, Taiwans central bank) made three emergency cuts in the key policy interest rates in October and November. Further emergency cuts are possible if financial markets remain volatile.
• The Economist Intelligence Unit has revised down its forecast for global economic growth in 2009-10. As a result, we have cut our real GDP growth forecast for Taiwan to 1.3% (from 3.4%) in 2009 and to 1.6% (from 3.7%) in 2010.

Monthly review

• In recent weeks politicians from the opposition Democratic Progressive Party have seized upon the sinking popularity of Mr Ma to launch public protests against the president's mainland China policy.
• Opposition politicians also protested during the visit, in November, of the chairman of the Association for Relations Across the Taiwan Strait (the body in China that deals with Taiwan policy), Chen Yunlin.
• The CBC cut its key interest rates by 25 basis points each on November 9th. This took the discount rate to 2.75% and the rate on accommodations with collateral to 3.125%.
• The controversial five-day visit of Mr Chen ended with both sides acting to strengthen direct trade and transport links across the Taiwan Strait, and four agreements were signed.
• Taiwan's overall merchandise exports plunged by 8.3% year on year, to US$20.8bn in October, the largest decline in almost seven years, as demand fell in key export markets.
• Taiwan's consumer confidence index for October dropped to the lowest level since monthly surveys began in early 2001. This fall occurred despite an easing of inflationary pressures in the same month.
• Registered inward investments in the first nine months of 2008 slumped by more than 48% year on year.

Source: Country Report

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