Taiwan’s economic growth should rebound to 4 percent next year from a contraction of 6 percent this year, and could grow more if the inventory cycle picks up later this year, Hong Kong-based analysts at Calyon Credit Agricole CIB, Credit Agricole’s corporate and investment banking entity, said in Taipei yesterday.
“Any revision will be made on the upside,” said Sebastien Barbe, head of emerging market research and strategy.
Barbe, however, was pessimistic about future export performance as demand from the US, Europe and Japan remains weak, and he said he expected the economic recovery would be more gradual than others believed.
“Taiwan lacks positive contributors to growth at the moment,” he said in his report.
There’s room for the government to allocate between 1 percent and 2 percent more of its GDP to boost the economy as this year’s stimulus spending accounted for only 1.6 percent of the GDP, Barbe said.
Because the net wealth of US householders has fallen by about US$14 trillion, further consumer and business retrenchment as well as rising jobless rates in the US will limit growth rebound, said analyst Mitul Kotecha, head of global foreign exchange strategy.
Kotecha said the US economy should rebound to 1.5 percent next year from this year’s 2.8 percent contraction, with the Eurozone seeing 0.2 percent GDP next year from this year’s 4.5 percent contraction and Japan to grow 1.7 percent from a 6.4 percent decline this year.
Closer business ties with China, whose shoots are the “greenest,” will provide an economic boost to Taiwan, although “the benefit will be limited,” Barbe said, forecasting China’s GDP will grow 7.5 percent this year and 8 percent next year.
“The Chinese stimulus is largely self-centered. It won’t benefit too much the rest of Asia,” he said in his report.
However, foreign investors in China may be attracted to invest in Taiwan to drive up local asset prices, he said, estimating that some 25 percent of the nation’s US$8 billion to US$10 billion capital outflows may be made up by incoming foreign investments.
Under this backdrop, Calyon expects the NT dollar to strengthen to the NT$30 level by the end of next year and the central bank to refrain from any interest rate hikes until the middle of next year.
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