Wednesday, January 11, 2012

Assessing Taiwan’s economic prospects in 2012

l  Despite disappointing news on export, investment, and employment in recent months, Ma administration officials have been “cautiously optimistic” concerning the island’s economic outlook this year.

l  In fact, many government officials expect the current economic downturn to “bottom out” at the end of first quarter 2012. If President Ma wins the reelection next week, the island’s economic prospects would be considerably brighter since cross-Strait economic engagement will continue—likely intensify—in the coming months.

l  For Taiwan’s export-oriented economy, the eurozone sovereign debt problem remains the most crucial issue in the coming three months, which will be the peak period of debt repayment for many European countries.

l  Although a broader eurozone crisis has probably been averted over the past few months because of support from the International Monetary Fund (IMF) and the European Central Bank (ECB), there are no easy or quick fixes to the fundamental issues.

l  However, since Taiwan's exposure to European debt is negligible, we do not expect that sluggishness in Europe to continue having an across-the-board impact on Taiwan's economy, including exports.

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