Download Taiwan Business Forecast Report Q2 2011 Brochure

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Taiwan Business Forecast Report Q2 2011
Description:
Healthy Growth Ahead
Taiwan’s growth outlook has improved, with recent indicators pointing to a steady momentum. However, we
are happy to keep our below-consensus 2011 real GDP growth forecast of 4.3% as we believe that the risks
to domestic property prices in 2011 are weighted to the downside. On the political front, the results of the
2010 municipal elections reaffirmed our view that the upcoming legislative and presidential elections will be
a close contest. The incumbent’s challenge is to put together a platform that ensures Taiwan’s sovereignty
while promoting continued strong economic and trade developments with the mainland, while the
opposition’s ability to formulate a policy that maintains healthy cross-Strait relations is vital to its election
prospects.
In line with our expectation, the KMT won three out of the five municipal elections held on November 27,
indicating relatively strong support for the KMT ahead of the presidential election scheduled for 2012. The
KMT won in its traditional stronghold of Taipei City, Sinbei City and Greater Taichung, while the opposition
Democratic Progressive Party (DPP) scored victories in Greater Kaohsiung and Greater Tainan. The DPP did
have a larger share of the overall vote, however, signalling a resurgence by the the opposition party. Given
that these five municipalities contain approximately 60% of Taiwan’s population, the election results served
as a key barometer for national sentiment and strengthened our view of tight elections in 2012.
Nonetheless, we believe that cross-Strait relations will remain healthy regardless of the election results. T
aiwan’s 2011 economic growth will be driven by both external and domestic demand. The island’s export
growth outlook has turned more favourable given the recent upgrades to our China, US and Japan 2011
growth forecasts. Meanwhile, both private consumption and investment will be key drivers to 2011 growth,
and we foresee domestic demand’s share of GDP growing over the coming years. We expect overall labour
market conditions and wage growth to improve, supporting consumption. We also see public investment
projects and improvements to cross-Strait ties keeping investment figures well supported. Moreover, a
stronger local currency should further bolster domestic demand. However, we anticipate a cooler property
market in 2011, capping the upside to domestic demand growth.
Taiwan continues to enjoy a strong business environment, placing it in 31st place (out of 167 countries) in
our business environment ratings. This robust rating is aided by strong scores in the ‘market orientation’ and
‘infrastructure’ sub-categories. We believe that the recently implemented Economic Cooperation Framework
Agreement will significantly enhance Taiwan’s business environment. Moreover, the landmark cross-Strait
agreement has in turn triggered Singapore’s willingness to explore a potential trade agreement with Taiwan.
Closer economic ties with Singapore would provide a further boost to Taiwan’s business environment,
especially since an agreement would improve the island’s regional economic integration and allow Taiwan
easier access to Association of Southeast Asian Nations markets.
Contents:
Executive Summary
Healthy Growth Ahead
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
2012 Elections: Cross-Strait Issues Take Spotlight Taiwan’s ruling Kuomintang (KMT) won three out of five
municipalities in the 2010 municipal elections while the primary opposition Democratic Progressive Party
(DPP) took a larger share of the overall vote, signalling no clear winner and reaffirming our view that the
upcoming legislative and presidential elections will be a tight contest
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Legal Status Quo To Prevail In 2010s Taiwan’s long-term political prospects are inseparable from its relations
with China, and while Cross-Strait relations have thawed in recent years, we believe that the status quo will
largely prevail
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Outlook Improved, But Property Concerns Linger
Although advanced government estimates put Taiwan’s 2010 real GDP growth at an impressive 10.5%, we
note that seasonally-adjusted annualised growth came in relatively flat at 0.8% in Q410
Table: ECONOMIC ACTIVITY
Balance Of Payments
CA Surplus To Continue Narrowing
Taiwan’s export growth outlook has turned more favourable given the recent upgrades to our China, US and
Japan 2011 growth forecasts
Table: CURRENT ACCOUNT
Monetary Policy
Tightening Will Be Gradual
Unlike most of its regional peers, Taiwan’s consumer price inflation (CPI) remains benign, coming in at just
1.1%
y-o-y in January
Table: MONETARY POLICY
Key Sector Outlook
A Cooler Property Market Ahead
Despite the government’s property cooling measures since mid-2010, Taiwan’s home prices – especially in
Taipei – have continued rising, prompting growing concerns about a bubble
Chapter 3: 10-Year Forecast
The Taiwanese Economy To 2020
The Mainland Factor
We think the odds are good that Taiwan will be able to revive growth over the coming years, a view
predicated on improving relations with the mainland, the island’s robust endowment of human capital, and
entrepreneurial zest
Table: Long-Term Macroeconomic Forecasts
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Key Sector Outlook
Mainland Tourists Offer Strong Potential
The importance of mainland Chinese visitors to Taiwan’s tourism sector is clearly growing, with the mainland
recently surpassing Japan to become Taiwan’s biggest source of visitor arrivals
Business Environment Outlook
Table: BMI Business And Operation Risk Ratings
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
TABLE: ASIA , ANNUA L FDI IN FLOWS
Table: Trade And Investment Ratings
Operational Risk
Chapter 5: Key Sectors
Consumer Electronics
Table: Consumer El ectronics Ov erview, 2008-2015
Table: Taiwan Retail Indicators – Sales Value by Format – Historical Data & Forecasts
Chapter 6: BMI Global Assumptions
Global Outlook
Growth Solidifies, But Inflation Poses A Threat
Table: Global Assumptions
TABLE: GLOBAL & RE GIONA L REA L GDP GROWT H % CHG Y-O-Y
TABLE: CONSENSUS FORECASTS
Chapter 7: Sector Forecast Appendix
Table: Autos Sector Key Indicators
Table: Food and Drink Sector Key Indicators
Table: Infrastructure Sector Key Indicators
Table: Oil and Gas Sector Key Indicators
Table: Ph armaceutical Sector Key Indicators
Table: Telecoms Sector Key Indicators
Table: Defence and Security Sector Key Indicators
Table: Freigh t Key Indicators
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