Country Report Taiwan September 2009

Summary

The president, Ma Ying-jeou of the ruling Kuomintang, has a strong mandate to govern, as the party also controls the Legislative Yuan (parliament).
Support for the president has fallen in recent months amid concerns that? ? closer ties with mainland China will undermine Taiwan's de facto independence.
Efforts to expand links across the Taiwan Strait will continue, with the primary aim being the signing of an Economic Co-operation Framework Agreement (a de facto free-trade agreement).
On June 25th the Central Bank of China (Taiwan's central bank) left the discount rate unchanged. It will maintain an accommodative monetary policy stance until there are signs of a sustained economic recovery.
The economy rebounded in the second quarter. This has led the Economist Intelligence Unit to raise its real GDP forecast for 2009: Taiwan's economy is now forecast to contract by 3.6%, from a shrinkage of 5.7% previously.
We believe that Taiwan will experience modest deflation in 2009. This is reinforced by the fact that the consumer price index fell by 2.3% year on year in July.

Mr Ma's popularity ratings have fallen in the light of his delayed response to Typhoon Morakot, which struck Taiwan in early August and left around 500 people dead.
Relations between China and Taiwan are likely to be damaged by the Taiwan government's decision to permit the Tibetan spiritual leader, the Dalai Lama, to visit the island.
The government has unveiled a NT$100bn (US$3bn) aid package to help the recovery from Typhoon Morakot, which has devastated a large part of southern Taiwan's agricultural sector.
In the second quarter of 2009 Taiwan's economy grew by a seasonally adjusted quarter-on-quarter annualised rate of around 20%, bringing the island's deep recession to an end.
The economy was aided by a recovery in private consumption and exports. However, despite the strong second-quarter rebound, unemployment reached 6.1% in July??