Macroeconomic Forecast Taiwan

Taiwan's current account surplus widened to US$10.8bn in Q111 from US$10.3bn in Q110, boosted by a strong services surplus. We see further upside potential for the services account, as the travel component should keep the balance well supported over the medium term. However, we note that downward pressure on the goods surplus is mounting, as many Taiwanese firms rely on Japanese suppliers for the supply of key raw materials and intermediate goods. Overall, we expect the 2011 full-year current account surplus to narrow to US$38.8bn (7.6% of GDP) from US$39.3bn (9.2% of GDP) in 2010.

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