1. Market Research
  2. > Financial Services
  3. > Real Estate
  4. > Residential Real Estate Market Trends
  5. > Taiwan Country Risk Report Q3 2016

Taiwan Country Risk Report Q3 2016

  • May 2016
  • -
  • Business Monitor International
  • -
  • 45 pages

Core Views Taiwan's economy contracted by 0.8% y-o-y in Q116, marking the third straight quarterly decline and extending the country's technical recession. Despite the transitory pick up in the Chinese economy, continued political uncertainty and a host of other domestic factors suggest that growth is unlikely to pick up until H216. With Q116 data coming in weaker than expected, we have downgraded our 2016 real GDP forecast slightly to 1.2% (from 1.5% previously). With Taiwanese president-elect Tsai Ing-wen having yet to fully articulate her China policy, Beijing has attempted to influence the formulation of Taiwan's cross-Strait policy by alternating between promises of economic growth and diplomatic threats. However, these measures are unlikely to yield significant results as Tsai focuses on establishing her government ahead of her installation on May 20.

We therefore expect cross-Strait ties to remain somewhat strained over the coming months, and note that the Cross-Strait Service Trade Agreement is unlikely to be ratified anytime soon. In line with our expectations, the CBC cut its discount rate by 12.5 basis points to 1.50% during its monetary meeting on March 24. We maintain our forecast for one more interest rate cut in 2016, which will take the benchmark rate to 1.375% by end-2016 as continued export headwinds and low inflation prompt the CBC to cut rates in a bid to support growth and keep the Taiwan dollar competitive. The lifting of housing restrictions by the central bank will be insufficient to boost the domestic housing market, which will continue to face headwinds following the aftermath of a deadly earthquake and the implementation of housing-related capital gains taxes. With housing-related taxes accounting for a not-insignificant proportion of government revenue, we maintain our forecast for the government's 2016 fiscal deficit to come in at 1.6% of GDP as housing-related revenues fall short. The TWD has rebounded considerably since the beginning of the year in line with the broad-based weakening of the US dollar. With the currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average 2016 forecast to TWD32.50/USD from TWD34.3.0/USD previously. Over the long term, an undervalued real effective exchange rate and a large current account surplus will lend support to the TWD, leading to gradual strength. Major Forecast Changes With Q116 data coming in weaker than expected, we have downgraded our 2016 real GDP forecast slightly to 1.2% (from 1.5% previously). With the currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average 2016 forecast to TWD32.50/USD from TWD34.3.0/USD previously.

Table Of Contents

Taiwan Country Risk Report Q3 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
No Pick Up Until H2168
Taiwan's economy contracted by 08% y-o-y in Q116, marking the third straight quarterly decline and extending the country's technical
recession Despite the transitory pick up in the Chinese economy, continued political uncertainty and a host of other domestic factors
suggest that growth is unlikely to pick up until H216 With Q116 data coming in weaker than expected, we have downgraded our 2016
real GDP forecast slightly to 12% (from 15% previously)
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 11
Lifting Of Restrictions Insufficient To Boost Housing Market11
The lifting of housing restrictions by the central bank will be insufficient to boost the domestic housing market, which will continue to face
headwinds following the aftermath of a deadly earthquake and the implementation of housing-related capital gains taxes With housingrelated
taxes accounting for a not-insignificant proportion of government revenue, we maintain our forecast for the government's 2016
fiscal deficit to come in at 16% of GDP as housing-related revenues fall short
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES12
Monetary Policy 13
Easing Cycle Not Over Yet13
In line with our expectations, the CBC cut its discount rate by 125bps to 150% during its monetary meeting on March 24 We maintain
our forecast for one more interest rate cut in 2016, which will take the benchmark rate to 1375% by end-2016 as continued export
headwinds and low inflation prompt the CBC to cut rates in a bid to support growth and keep the Taiwan dollar competitive
Monetary Policy Framework 14
FX Forecast 15
TWD: Gradual Appreciatory Bias Due To Solid Balance Sheet15
The TWD has rebounded considerably since the beginning of the year in line with the broad-based weakening of the US dollar With the
currency supported by strong fundamentals and the US dollar likely to continue to gradually weaken, we have upgraded our average
2016 forecast to TWD3250/USD from TWD3430/USD previously Over the long term, an undervalued real effective exchange rate and
a large current account surplus will lend support to the TWD, leading to gradual strength
TABLE: BMI CURRENCY FORECAST15
Outlook On External Position 17
TABLE: MAIN IMPORTS AND EXPORTS17
TABLE: MAIN IMPORT AND EXPORT PARTNERS17
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE17
Chapter 2: 10-Year Forecast 19
The Taiwan Economy To 2025 19
Multiple Headwinds Against Structural Growth19
A strong recovery from the global financial crisis by no means suggests that Taiwan's economy will maintain a robust growth trajectory
going forward We believe the lingering presence of the government within the banking sector, an increasingly uncompetitive tech
sector, an overly tech-focused economy and the reluctance to speed up Chinese investment will all impede Taiwan's structural growth
prospects Moreover, a rigid labour market, coupled with fast deteriorating demographics will serve to erode the attractiveness of
Taiwan's business environment Lastly, we expect the structural shift in China's economy to carry wide-ranging ramifications for Taiwan
We expect real GDP growth to average 31% between 2016 and 2025
TABLE: LONG-TERM MACROECONOMIC FORECASTS 19
Chapter 3: Political Outlook 23
SWOT Analysis 23
BMI Political Risk Index 23
Domestic Politics 24
Cross-Strait Ties To Remain Strained24
With Taiwanese president-elect Tsai Ing-wen having yet to fully articulate her China policy, Beijing has attempted to influence the
formulation of Taiwan's cross-Strait policy by alternating between promises of economic growth and diplomatic threats However, these
measures are unlikely to yield significant results as Tsai focuses on establishing her government ahead of her installation on May 20
We therefore expect cross-Strait ties to remain somewhat strained over the coming months, and note that the CSSTA is unlikely to be
ratified anytime soon
TABLE: POLITICAL OVERVIEW 24
Long-Term Political Outlook 26
Legal Status Quo To Prevail Into The 2020s26
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 the status quo will largely prevail While further economic integration is likely between the two Chinas, we
exclude meaningful political convergence Meanwhile, Taiwan is extremely unlikely to regain internationally recognised independence
As a result, we believe Taiwan will remain in a political no-man's land - with this being the least worst path for political stability
Chapter 4: Operational Risk 29
SWOT Analysis 29
Operational Risk Index 29
Operational Risk 30
TABLE: OPERATIONAL RISK30
Economic Openness 31
TABLE: TOP 5 IMPORT PRODUCTS and IMPORT PARTNERS, 2010-2014, USDMN 31
TABLE: FREE TRADE AGREEMENTS32
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES33
Availability Of Labour 36
TABLE: ASIA - AVAILABILITY OF LABOUR RISK37
TABLE: LABOUR FORCE EMPLOYMENT BY SECTOR ('000), 2006-201238
Chapter 5: BMI Global Macro Outlook 41
Global Macro Outlook 41
Tentative Stability, But New Risks Emerging41
TABLE: GLOBAL ASSUMPTIONS41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %43
TABLE: MACROECONOMIC DATA and FORECASTS45

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Ahmad

+1 718 618 4302

Purchase Reports From Reputable Market Research Publishers
Household storage

Household storage

  • $ 8600
  • Industry report
  • August 2016
  • by Verdict Retail

Summary The household storage market grew by 2.0% in 2015, marginally underperforming the overall homewares market. This underperformance will continue into 2016 due to declines for physical entertainment ...

Global and Chinese CCTV Camera Housing Industry, 2016 Market Research Report

Global and Chinese CCTV Camera Housing Industry, 2016 Market Research Report

  • $ 2800
  • Industry report
  • November 2016
  • by Prof Research

The 'Global and Chinese CCTV Camera Housing Industry, 2011-2021 Market Research Report' is a professional and in-depth study on the current state of the global CCTV Camera Housing industry with a focus ...

2016 Global Camera Housing Industry Market Report

2016 Global Camera Housing Industry Market Report

  • $ 2800
  • Industry report
  • August 2016
  • by Prof Research

The 'Global and Chinese Camera Housing Industry, 2011-2021 Market Research Report' is a professional and in-depth study on the current state of the global Camera Housing industry with a focus on the Chinese ...

Consumer Lifestyles In Bulgaria

September 2016 $ 1910

Emerging Market Households

August 2016 $ 1197

ref:plp2016

Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.