Outlook for 2011-15

• The popularity of the president, Ma Ying-jeou of the ruling Kuomintang, will continue to fluctuate in line with broad economic indicators, rather than being determined by the issue of links with mainland China.
• The opposition Democratic Progressive Party (DPP) has chosen a China expert, Tsai Ing-wen, as its candidate for the 2012 presidential contest. The choice suggests that it realises the need for a credible policy regarding China.
• The Central Bank of China (CBC, Taiwan's central bank) raised its main policy interest rate, the discount rate, by 12.5 basis points to 1.75% on March 31st. The CBC is expected to tighten monetary policy gradually during 2011-15.
• Inflows of hot money will continue to complicate the CBC's interest rate policy as they could cause a rapid rise in the exchange rate, which in turn might undermine the competitiveness of Taiwan's export-led economy.
• Economic growth will average around 4% a year in 2011-15. The largest contributions to economic growth in the forecast period will come from private consumption and the external sector.
• The New Taiwan dollar will be lent support by Taiwan's substantial foreign-exchange reserves. The Economist Intelligence Unit expects the local currency to strengthen gradually against the US dollar in 2011-15.

Monthly review

• In late April the DPP selected Ms Tsai as its candidate for the 2012 presidential election. She is the first woman to be nominated as a presidential candidate in Taiwan's history
• The changing nature of relations across the Taiwan Strait threatens to undermine Taiwan's important defence relationship with the US-many observers are questioning the reluctance of the US to sell advanced weapons to Taiwan.
• Ms Tsai has revived the issue of whether Taiwan should continue with the construction of its fourth nuclear power plant in the wake of the nuclear crisis in Japan, where reactors were damaged by the powerful earthquake in March.
• The decision by the CBC to raise interest rates for the time fourth time in succession on March 31st came as no surprise, amid a steadily expanding domestic economy and rising inflationary pressures.
• Early estimates suggest that the rate of real GDP growth in the first quarter of 2011 reached an unexpectedly rapid 6.2% year on year. Several economic indicators suggest that the country's economy still has momentum.
• Taiwan's industrial production reached its highest ever level in March, breaking the previous record set in December 2010.