Taiwanese GDP In For A Bumpy Ride

Jul 29, 2015

Recently the Asian Development Bank reduced its forecast for 2015’s GDP growth for Taiwan from 3.7% to 3.4%. In the same report, other countries peripheral to China were reduced as well. The reasons given were mainly due to the worse-than-expected economic performance in the United States and in China. I can understand that the United States being one of Taiwan’s exporting destinations, especially of electronics, would cause a dent in the GDP, but I am sure that China, because of its close proximity, is the main cause of the economic downturn in Taiwan.

This reduction in GDP growth has caused a great deal of concern in the present government, to the extent that they are trying to boost infrastructure spending as one of the ways to positively impact their GDP. However, there is another motive that is probably spurring the government to do something, and that has a lot to do with politics.

In January 2016, the country holds elections and the opposing party Presidential candidate, Tsai Ing-Wen, right now is the odds on favorite to win. Her stand is based on having an economy and political structure that is more inclusive, increasing the quality of education, and most importantly, loosening ties with mainland China, unlike her opponent’s party who want to strengthen those ties.An interesting tidbit, Taiwan will have a woman president for the first time ever as the candidates for that position are both women. In the long run though, Taiwan is one of my favorite investment destinations in the developing world and I would look to companies like Foxconn and Himax Technologies (HIMX) to grow substantially as the export sector heals, especially after the elections.

Source: Nasdaq

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