Taiwan's current account surplus is sizeable and likely to remain so

Taiwan's current account surplus rose strongly to 16.8% of GDP in Q1 2015 from 14% in Q4 2014. Surges in the trade surplus alone contributed around 3pp to the increase, thanks to sharply reduced commodity import prices. The trade surplus remained sizeable at USD12.4bn in Q2 after USD13.4 in Q1, pointing to another big current account surplus. In fact, Taiwan's recent current account surpluses (>10% of GDP) were more than doubled the level during 2008 financial crisis. 

The latest data shows Taiwan has the second-largest current account surplus relative to GDP among Asian economies. The current account surplus is likely to see a reduction in H2 as the impact of low oil prices fades on nominal import values. But even so, the annual surplus is still seen reaching 10% of GDP - one of the highest in the world. 

"Our forecast of a still sizeable current account surplus is based on the expected strengthening of global demand, which is the very opposite of 2008," says Societe Generale.

Indeed, one of the key supports for the Fed's lift-off is sustained above-trend growth of the US economy. The expected recovery in external demand led by the US bodes well for a recovery in export growth.