FROM THE ECONOMIST INTELLIGENCE UNIT
OVERVIEW: Domestic political tensions will stay high ahead of the presidential election scheduled for early 2004. Relations between Taiwan and China will remain uneasy. GDP growth will be 3.2% in 2003 and 5.4% in 2004. Consumer prices will rise by an annual average of 0.3% in 2003, with inflation picking up to 1.4% in 2004. The New Taiwan dollar is expected to firm against the US dollar from the second half of 2003. The current- account surplus will narrow from US$25.7bn (9.1% of GDP) in 2002 to US$17.4bn (5.6% of GDP) in 2004.
DOMESTIC POLITICS: The Democratic Progressive Party (DPP) is the largest party in the legislature, but it lacks a majority even with the support of its allies in the Taiwan Solidarity Union (TSU). As a result, to get legislation enacted, the president, Chen shui-bian, who is also the leader of the DPP, must continue to rely on his government's ability to co-opt members of the opposition bloc, comprising the Kuomintang (KMT, or Nationalists) and the People First Party (PFP).
As the KMT and the PFP will not want Mr Chen's government to appear an effective policymaking body ahead of the presidential election scheduled to take place in March 2004, to be followed by the legislative yuan (parliament) election later in the same year, the possibility of cross-party co-operation during the remainder of 2003 and into 2004 is low.
INTERNATIONAL RELATIONS: The new leadership of China's ruling party, appointed at the 16th Chinese Communist Party (CCP) congress in November 2002, will be in formal charge of cross-Strait affairs in 2003-04, but the departing leadership will retain a decisive influence. No high-level meeting between the two sides is likely, as Mr Chen will not compromise Taiwan's separate and independent status. Lower-level rapprochement will...