Taiwan’s economy may experience a lukewarm U-shaped recovery next year amid a slow recovery in demand for electronics by the nation’s major export destinations, including the US and Europe, Standard Chartered economists said yesterday.
Meanwhile, Taiwan’s major export rivals — Hong Kong, Singapore and South Korea — are expected to post a V-shaped recovery from the worst economic recession since War World II, supported by a better recovery in financial services and pharmaceuticals, as well as a lower base of comparison.
Standard Chartered economist Tony Phoo (符銘財) forecast that Taiwan’s GDP would dip 5 percent this year from a year ago before rising 3 percent next year on the back of a slow recovery in exports.
The bank’s projection for next year is lower than 3.92 percent forecast by the Directorate-General of Budget, Accounting and Statistics.
Premier Wu Den-yih (吳敦義) told the Chinese-language Commercial Times in an interview published yesterday that he expected next year’s growth would be higher than 3.92 percent.
Given the forecast relatively weaker recovery in Taiwan’s economy, it would “be a necessary approach for Taiwan’s central bank to keep its loose monetary policy to help drive economic growth,” Phoo said.
The nation’s central bank may extend its long-drawn loose monetary policy in the next few quarters by keeping the key rediscount rate at a record low of 1.25 percent until the end of next year, Phoo said.
The recent recovery in consumer confidence, as seen in rising retail prices and housing sales, “is built on very unstable [foundations] such as a stock market rally and low interest rate environment,” Phoo said.
Besides, the recovery in exports was “uneven,” he said.
Chinese demand has fueled demand for flat panels and plastic circuit boards made by Taiwanese companies, but this could wane if it’s an effect of Beijing’s short-term stimulus measures, Phoo said.
The US and Europe, which consume about US$18 trillion in goods a year, would remain the major export drivers for Taiwan like other export-oriented economies, the bank said.
Taiwan has lost as many as 160,000 jobs since last fall as factory utilization fell after the global economic slump hit demand for electronics in the US and Europe, Standard Chartered Bank said.
“For the US, the worst is over, but it will be a long road to a full recovery,” said Nicolas Kwan (關家明), Standard Chartered’s regional head of research in Asia.
The US economy may experience an L-shaped recovery as towering debts and rising deficit would limit its strength in boosting consumer spending and in injecting more capital into the markets via monetary polices, Kwan said in Taipei.
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