Taiwan Infrastructure Report Q2 2016
BMI View: We expect growth in Taiwan's construction sector to pick up beyond 2015, supported by expansionary spending policies, a focus on developing the country's transport network and a rebalancing of the power sector. The presidential elections in 2016 pose the most significant downside risk to our outlook. Forecast And Latest Updates
Taiwan's construction industry contracted 1% y-o-y in 2015. We forecast the industry to return to growth and register 1.3% y-o-y expansion in 2016, supported by expansionary expenditure and monetary policies.
We hold our view Taiwan's export-orientated manufacturing sector will continue to face headwinds due to the ongoing slowdown in China and reduced global demand for tech products. These factors will weigh on the non-residential buildings segment.
Over our forecast 10-year period, we expect Taiwan's construction industry to average 3.5% growth per annum. We believe construction activity will be supported by favourable government policies, continued focus on developing the country's transport network and a rebalancing of the power sector.
We expect a weakening of the property market in 2016, given the government has implemented a capital gains tax (effective January 1 2016) with a top rate of 45.0% to curb property market speculation and surging real estate prices.
We believe DPP's landslide victory in the presidential and parliamentary elections in January 2016 will have a significant impact on Taiwan's energy sector. President-elect Tsai Ing-wen's commitment to phasing out nuclear by 2025, combined with the already widespread anti-nuclear sentiment in Taiwan, will weigh on the nuclear sector. Increased support for renewable energy and strengthening project pipeline for coal and gas plants means the government's focus is increasingly shifting to alternative power sources to fill the gap from reduced nuclear output.
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