Goldman Sachs Group Inc raised its economic growth forecasts for Taiwan, citing a more positive outlook for exports. It also lifted its prediction for South Korea this year, saying it expects domestic demand to rebound from a slump sooner and more sharply than previously.
For Taiwan, the world's third-largest securities firm upgraded its economic growth forecast for this year to 4.5 percent from 4.2 percent, according to a research report released yesterday.
A more positive outlook for exports is prompting companies to increase investment, the report said.
"The increase in non-tradable sector investments will generate a more sustainable growth in job creation and wages," Hong Kong-based economist Enoch Fung said in the research report.
Goldman also lifted its 12-month forecast on the New Taiwan dollar, saying it expects the US dollar to weaken further. The firm now predicts the NT dollar will reach NT$28.50 per US dollar in the next 12 months, compared with a previous estimate of NT$30.50.
Goldman Sachs raised its growth estimate for South Korea for this year to 4.5 percent from 3.7 percent and that for next year to 5.3 percent from 4.7 percent.
"Our GDP forecast changes are driven by our greater optimism on the outlook for domestic demand," Sun Bae-kkim, a Hong Kong-based economist at Goldman, said in the report.
"Our new forecasts now see domestic demand recovery beginning to materialize earlier, as soon as the second quarter, and packing more punch than consensus expectations," Sun said.
The upgrades come after the government slashed taxes and the central bank dropped its key interest rate to a record low to spur spending in Asia's third-largest economy. Households tightened their purse strings in the past two years after many borrowed beyond their means and were unable to meet debt payments.
The improvement in the economy means the central bank will probably keep its benchmark overnight call rate at an all-time low of 3.25 percent for the remainder of this year, Goldman said.
The Bank of Korea's next monthly rate-setting meeting is scheduled for tomorrow.
Inflationary pressure will likely be kept at bay by won gains, which are making imports cheaper, Goldman said. The won has gained about 3 percent this year versus the US dollar and on Monday closed at 1,004.60 won, its strongest since Feb. 23.
The currency will probably strengthen to 1,000 won per dollar in the next three months and 950 won in a year's time, Goldman said.
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