Taiwan’s GDP could expand by 4.5 percent to 5 percent next year, driven by a recovery in private consumption and economic benefits from warming trade ties with China, Fubon Financial Holding Co (富邦金控) forecast yesterday.
The financial services provider, the nation’s second-largest by assets, expressed cautious optimism that the domestic economy would continue on its path of stable recovery next year and count on exports to emerging Asian economies to drive growth as the US and Europe would remain mired in battling unemployment and fiscal debt woes.
Rick Lo (羅瑋), head economist at Fubon Financial, said the forecast economic growth next year was impressive, given already strong GDP growth of 9.8 percent for the first three quarters of the year and a forecast full-year expansion of more than 10 percent.
Lo said there was room for an upward revision if private consumption proved stronger than expected, bolstered by closer trade ties with China.
“The Economic Cooperation Framework Agreement [ECFA] and Taiwan’s opening to visits by individual Chinese tourists may be the catalysts in boosting consumer spending and corporate earnings,” Lo said.
Exports will remain a key driver, with Taiwan increasingly shifting its focus to Asian markets, which now account for nearly 70 percent of its exports, he said.
The US and Europe constituted 22.1 percent of Taiwanese exports in the first 11 months of the year, even though shipments to Europe reached a record-high of US$2.95 billion last month, Ministry of Finance data showed on Tuesday.
Amid reviving private consumption and inflationary pressure, the central bank may raise the benchmark discount rate from the current 1.5 percent to 1.625 percent late this month, as well as hike interest rates by 12.5 basis points in each of its quarterly policy meetings next year, Lo predicted.
“The rate adjustment may accelerate if consumer and asset prices trend up faster than expected,” he said.
The New Taiwan dollar is forecast to strengthen slightly against the US currency, trading at an average of NT$30 to NT$31 next year, Lo said.
The local currency closed at NT$30.706 in Taipei trade yesterday.
Lo attributed the local currency’s appreciation pressure to market expectations of a weak US dollar after the US Federal Reserve suggested further quantitative easing measures in June next year.
“The second quarter is therefore critical in observing the global economy as the region — including Taiwan — will suffer if the US economy fails to recover,” Lo said.
The US accounted for 32.1 percent of Taiwanese exports last month, ministry data showed.