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Economic growth up in last quarter

Taiwan's economy, the fifth largest in Asia, grew at a faster-than-expected pace in the fourth quarter after stock market gains and a recovery from credit-card defaults boosted consumption.

Gross domestic product rose 4.02 percent from a year earlier, the statistics bureau said yesterday.

Stronger than expected growth makes it easier for central bank Governor Perng Fai-nan (彭淮南) to keeping pushing up interest rates to stem outflows of money and keep the nation's currency stable.

Policy makers have increased the key rate every quarter from September 2004 to a five-year high of 2.75 percent, or just over half the Federal Reserve's benchmark.

"Economic growth exceeded our previous forecast thanks to a significant recovery in the stock market and a recovery in domestic consumption," Hsu Jan-Yau (許璋瑤), the statistics bureau head, said at a press briefing.

Consumer spending was boosted by a recovery from past credit and cash-card defaults, Hsu said.

The government forecasts a 4.3 percent economic expansion this year, up from the previous estimate of 4.1 percent. Last year's growth was 4.6 percent.

Household spending, which accounted for a third of the fourth quarter's economic growth, rose 2.4 percent from a year earlier. Private investment jumped 10.6 percent, the most in two years.

Export growth, which slumped in the fourth quarter at 2.7 percent because of an electronics glut, will play a smaller role in this year's economic expansion than last year, Hsu said.

Export growth slowed to 7.61 percent in the fourth quarter from 18.59 percent in the previous quarter, according to the statistics. The domestic contribution to the economy will rise to 60 percent from 25 percent last year.

Exports have been hurt by a US slowdown that created stockpiles of liquid-crystal panels and semiconductors.

Fourth quarter growth "increases the possibility of the central bank raising interest rates in March," said Cheng Cheng-mount (鄭貞茂), chief economist at Citibank Taiwan Ltd in Taipei.

"Taiwan's economic growth this year will have to rely on domestic demand, as momentum from overseas slows," Cheng said.

The government forecast for first quarter growth was unchanged at 4.03 percent.

Taiwan lenders wrote off more than US$3 billion of bad credit-card loans last year, helping to dispose of a curb on spending, and a jobless rate at almost a six-year low in December is also encouraging people to shop.

Growth in overseas sales, which account for about half of Taiwan's US$355 billion economy, is expected to slow to 6.2 percent this year from 12.9 percent last year, the statistics bureau said. Electronics are the largest part of Taiwan's exports.

Import growth is also expected to slow, with the trade surplus to widen to US$22.7 billion from US$21.3 billion last year, the bureau said.

Inflation may reach 1.4 percent, the bureau said. That is down from the previous forecast of 1.5 percent. Consumer prices have been rising since November after previous declines.
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