Standard Chartered Bank (Taiwan) Ltd yesterday raised its forecast for Taiwan's economic growth this year to 4.5 percent, citing stronger-than-expected private spending and pre-election stimuli in the second half.
The upward adjustment, from the bank's previous estimate of 4.1 percent, is so far the most bullish prediction for the nation's economy, higher than forecasts made by the government and local think tanks.
The Directorate General of Budget, Accounting and Statistics in May forecast the nation's GDP growth would reach 4.38 percent. Academia Sinica put it at 4.46 percent and the Chung-hua Institution for Economic Research (中經院) predicted a 4.17 percent growth in April.
Standard Chartered, the nation's largest foreign bank in terms of the size of its branch network, attributed the stronger GDP growth to a rebound in consumer spending following the legislature passing the "personal bankruptcy law" last month with the market bidding farewell to the credit and cash card debacle, said the bank's economist Tony Phoo (符銘財) at a press conference yesterday.
"We forecast that private consumption this year will grow by a solid 3 percent year-on-year, double the figure of 1.5 percent recorded last year," he said.
Before the controversial Consumer Debt Clearance Regulations Law (消費者債務清理條例) was passed by the legislature, banks had tightened consumer lending and consumers had adopted a conservative attitude, driving auto sales down by 31 percent last year.
Now creditor banks' ability to seek an early foreclosure of unpaid loans by seizing debtors' residential property is limited, lending support to overall consumer confidence.
In addition, outstanding credit and cash card loans as of the end of April totalled NT$316 billion (US$9.67 billion) and NT$154 billion respectively, representing a mere 1.9 percent and 0.9 percent of total bank lending. The impact of card debts is no longer significant, the bank said.
Phoo said he believed that the worst was over for the auto market and consumer financing.
Strong equity prices would also help, the bank said.
Although the central bank raised its benchmark re-discount rate and the required reserve ratio for foreign currency deposits to 3.125 percent and 5 percent respectively last month, Standard Chartered believe the impact on consumption and investment would be limited considering that rate levels are still historically low.
"In fact, foreign investors responded favorably and piled into Taiwan equities, raising the benchmark TAIEX by 13 percent in the second quarter," Phoo said.
The local bourse yesterday advanced 181.53 points, or 1.94 percent, to close at 9369.84 on turnover of NT$227.08 billion.
"Stronger private consumption growth is the key to our more positive outlook for Taiwan during the second half," the economist said.
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