2013-03-16 11:14:31 - New Country Reports market report from Business Monitor International: "Taiwan Business Forecast Report Q2 2013"
Our growth forecasts for 2013 stands at 3.0%, which remains below a Bloomberg consensus of 3.4%.
We expect the recent recovery in economic momentum to last through H113, before an expected slowing in China's economy begins to impinge on Taiwanese exporters again. Alongside pertinent indicators such capital goods imports and guidance from the corporate sector, we expect consensus expectations for real GDP growth to start moving towards our projections.
With inflation likely to remain well-contained and against a backdrop of economic uncertainty, we expect monetary policy to remain relatively accommodative. We expect the benchmark interest rate to remain unchanged at 1.875% while the central bank continues to actively intervene in the currency markets to suppress the Taiwan dollar in a bid
to support exports.
Full Report Details at
- www.fastmr.com/prod/552244_taiwan_business_forecast_report_q2_20 ..
Taiwan's President Ma Ying-jeou recently announced a series of proposed reforms to the country's pension system as poor management of pension benefits, rapidly deteriorating demographics, and hidden debts incurred by state-owned enterprises and local governments threaten to create a fiscal crisis. Notwithstanding the obvious benefits they engender, it remains to be seen whether Ma and his ruling Kuomintang party will be able to enact these reforms, given the political risk they will carry, especially into the 2016 elections.
The political scene in 2013 is likely to be dominated by the government's pension reform efforts, as well as the impending resumption of negotiations on the Trade and Investment Framework Agreement (TIFA) with the US. We believe that the TIFA, if implemented successfully, is likely to engender significant benefits, both economic and political, for the country.
Major Forecast Changes
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 impede Taiwan's structural growth prospects. Moreover, a rigid labour market, coupled with fast deteriorating demographics will serve to erode the attractive of Taiwan's business environment. We have consequently revised our longer term growth expectations and expect real GDP growth to average 3.9% between 2014 and 2022, compared to a previous projection of 4.7%.
Key Risks To Outlook
The economic landscape in the eurozone looks increasingly precarious. Should we see a full-blown crisis in the currency bloc, or a downward spiral in China's economy, we can expect Taiwan to head into a sharp recession.
Partial Table of Contents:
Major Forecast Changes
Key Risks To Outlook
BMI Political Risk Ratings
Pensions A Growing Risk, TIFA Carries Upside Potential
- Taiwan's political scene in 2013 is likely to be dominated by the government's pension reform efforts, as well as the impending resumption of negotiations on the Trade and Investment Framework Agreement (TIFA) with the US. Unless we witness sustained and sufficient reform efforts to the country's pension system, the island's rapidly deteriorating demographics will pose severe structural risks to its longer-term fiscal position.
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 the status quo will largely prevail. While further economic integration is likely between the two, we exclude meaningful political convergence, with Taiwan extremely unlikely to regain internationally recognised independence.
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Downgrading Structural Growth As Multiple Headwinds Build
- 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 technology sector, an overly tech-focused economy and the reluctance to speed up Chinese investment, will impede Taiwan's structural growth prospects.
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
TWD: Central Bank Intervention To Cap Further Strength
- We are maintaining our neutral bias towards the Taiwanese dollar over the near-term. The recent pick up in economic momentum, coupled with foreign capital inflows is likely to provide supportive pressure. That said, the central bank is likely to maintain its interventionist role in a bid to curb further currency appreciation and support exports.
TABLE: CURRENT ACCOUNT
Pension Reforms Vital To Avoid Fiscal Blowout
- President Ma Ying-jeou recently announced a series of proposed reforms to the country's pension system as poor management of pension benefits, rapidly deteriorating demographics, and hidden debts incurred by state-owned enterprises and local governments threaten to create a fiscal crisis..
TABLE: FISCAL POLICY
Accommodative Stance Expected In 2013
- On the back of a transient turnaround in regional economic momentum, as well as an expected re-acceleration in regional food consumer price inflation, we could see headline inflation in Taiwan start to pick up again. That said, we do not expect these pressures to extend past H113 as the economic recovery stalls while grains prices begin to moderate.
TABLE: MONETARY POLICY
Chapter 3: 10-Year Forecast
The Taiwanese Economy To 2022
The Mainland Factor
Full Table of Contents is available at:
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