Citibank Taiwan Ltd (花旗台灣) yesterday revised its GDP forecast for Taiwan this year, predicting a milder decline of 2.7 percent — compared with its prior estimate of a 3.9 percent drop — on the back of recovering exports.
“We expect the nation’s exports momentum to continue during the post-Christmas season until January as orders from China for the Lunar New Year holidays pick up,” the bank’s chief economist, Cheng Cheng-mount (鄭貞茂), told a media briefing yesterday.
He said the nation’s exports should stay above US$20 billion in each of the three months ending in January, with the local electronics sector benefiting the most from a pickup in demand from China.
After a V-shaped recovery in the middle of this year, the local economy is likely to post a healthy 4.3 percent growth next year before accelerating to 5 percent in 2011, he said.
“A full economic recovery can be expected in the fourth quarter of next year since exports in the first half of next year will remain flat,” Cheng said.
As China and other Asian countries are expected to emerge from the global slump faster and stronger than their Western peers, Cheng said Taiwanese exporters should shift their focus to emerging markets in the region, as well as from the US to Europe.
The region’s currencies, which he said were mostly undervalued by an average of 10 percent, would be under pressure to appreciate next year, adding that the Chinese yuan would likely post a small 3 percent rise next year.
To avoid derailing the nation’s mild recovery, Cheng expects the central bank will only raise its benchmark interest rate by 0.25 percentage points to 1.5 percent in September next year, followed by another quarter-percentage point rise in December.
But the nation’s record-high unemployment will remain high next year, averaging 5.9 percent before retreating slightly to 5.6 percent in 2011, with household incomes seeing minimal gains, he said.
Inflation will be less of a concern in Taiwan as it will be in the rest of Asia, Cheng said, forecasting the nation’s consumer price index to grow 0.9 percent and 1.5 percent next year and the year after.
Citibank’s estimates were close to official forecasts.
The Directorate-General of Budget, Accounting and Statistics last Thursday forecast that the economy would contract 2.53 percent this year before recovering to 4.39 percent growth next year.
Earlier this week, BNP Paribas forecast the local economy would slide 3.1 percent this year before rising 5.8 percent next year, 3.6 percent in 2011 and 4.2 percent in 2012.
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