Standard Chartered PLC yesterday raised its forecast for Taiwan’s GDP growth to 5.6 percent this year, from last year’s estimate of 4.6 percent, on the back of a stronger-than-expected recovery in the first half and continued momentum expected to extend into the second half.
“The second half may see growth equal to that in the first half, although major economic bellwethers show signs of moderation,” Tony Phoo (符銘財), head economist of Standard Chartered Bank Taiwan Ltd (渣打銀行), told a media briefing.
Domestic demand may help shore up GDP growth in the second half after taking a backseat in recent years, thanks to recovering consumer confidence as various sectors increase their staff numbers.
Employment in the manufacturing sector recently recovered to pre-financial crisis levels, suggesting a growing need for labor to match demand, Phoo said, adding that hirings by the service industry returned to pre-crisis levels last year.
Strains on labor will drive employers to raise wages, lending further support to consumer confidence, he added.
Domestic demand could receive an additional boost from the recent opening of the nation to free independent Chinese tourists, although the benefits may not be evident in the near term, Phoo said.
The trend may heighten inflationary pressures because it is demand driven and therefore less elastic, he said.
The UK-based banking group expects the consumer price index to average 2.2 percent this year, relatively high in light of the nation’s past record, Phoo said.
“The central bank may accelerate the pace of interest rate hikes once the core inflationary gauge rises above the 2 percent mark,” he said.
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