Economic growth will slow to a more sustainable rate from the supercharged pace that was recorded in 2010, when real GDP grew by an annual average of 10.8%. Despite ongoing uncertainties in the world economy, most notably in the euro zone, the global economy should perform respectably in 2011, with global GDP forecast to expand by 3.2% (at market exchange rates). Growth in Asia is set to be especially strong, and this will support demand for Taiwan's exports. However, the twin natural disasters of an earthquake and a tsunami that struck Japan on March 11th are likely to disrupt local manufacturers' supply chains until at least May 2011, as well as undermining demand in one of their major export markets, particularly in the second quarter of 2011. On balance, economic growth will average around 4% a year in 2011-15. Although this will mean that growth in Taiwan will be much faster than in the main OECD economies, it will be well below the island's 5.6% average annual GDP growth rate in 2004-07. The largest contributions to economic growth in the forecast period will come from private consumption and the external sector.

Private consumption growth will average a healthy 3.5% a year in 2011-15, supported by a number of factors, including improving consumer confidence, falling unemployment and rising nominal wages. Low retail interest rates, especially in the early part of the forecast period, will also underpin growth in private consumption. Growth in investment spending reached 23.7% in 2010. The high year-on-year base in 2010 means that investment growth will slow sharply in 2011, but it will still grow by a steady 3.4% a year on average over the forecast period. In the medium term, investment spending in Taiwan will be supported by new foreign and domestic private-sector investments in high-technology and research-based fields. Moreover, improving relations with China will bring a loosening of cross-Strait trade and investment restrictions, and this should encourage greater foreign investment in Taiwan.

Exports of goods and services grew by an impressive 25.6% in 2010, owing in part to a strong recovery in economic growth in the country's main export markets in Asia. Growth in exports will slow to a more sustainable average rate of 6.2% a year in 2011-15. A major factor supporting exports in the forecast period will be improving cross-Strait relations. Services exports will be supported by an expansion in freight traffic, and also by growth in the number of visitors to Taiwan from mainland China as visa restrictions are gradually relaxed.

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