HSBC has raised its GDP growth forecast for Taiwan this year to 5 percent, from its prior forecast of 4.7 percent, on the back of a faster-than-expected global economic recovery, which has fueled solid demand for Taiwanese electronics.
The London-based financial conglomerate said in a report released yesterday said that exports would continue to be a top growth driver for Taiwan this year, increasing 13.5 percent from last year, as demand in the US and core European economies bounces back faster and more strongly while that in China remained resilient.
Despite the revision, HSBC called attention to events unfolding in Japan, the Middle East and North Africa that could weigh on international oil prices and the pace of global economic recovery.
“The global economic recovery kicked off in 2011 at a stronger-than-expected tempo, pushing our GDP forecast for this year to 5 percent from 4.7 percent,” Donna Kwok (郭浩莊), HSBC economist for Greater China, said in a statement.
Unemployment in the US, the world’s largest consumer of electronic products, has slowed for four consecutive months to a two-year low of 8.8 percent last month. Forward-looking trade indicators, such as the ISM Manufacturing survey by the Institute of Supply Management and HSBC’s Asia purchasing managers’ index, or PMI — both gauges of the manufacturing sector’s health, point to growth ahead.
The latest retail and industrial production data from the US and Germany lent further support for a revival in global technology demand, Kwok said.
“Taiwan’s exports growth engine will continue to hum” unless crude oil prices rise sharply this year, she said.
HSBC expects Taiwan’s consumer prices to rise 2.3 percent this year, higher than the 2 percent increase the government predicted in February, but lower than the rest of Asia.
Even though inflationary pressures are escalating in the region, consumer prices remain benign in Taiwan, Kwok said.
The economist attributed the inconsistency to a sustained wage inertia that has curtailed household spending and the development of private consumption into a full-fledged growth driver as in Hong Kong and Singapore.
“Real wage growth and solid domestic demand are needed to dismantle Taiwan’s status as an inflation laggard,” she said.
HSBC expects the situation to improve after the government allows independent Chinese tourists to visit Taiwan as nearly 20 percent of Taiwanese workers are employed in the retail and wholesale sectors and another 40 percent in other services-producing industries.
Chinese travelers overtook tourists from Japan, Hong Kong, the US, Europe and South Korea to become the biggest visitor group last year, accounting for 22 percent of the total and rising more than nine-fold since 2004.
However, HSBC cautioned that it would have to revise its GDP forecast if Japan fails to contain the radiation crisis in one or two months, leading to a collapse in intraregional trade or triggering global investor risk aversion.
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