Financial services provider Barclays predicted yesterday that Taiwan’s economic growth will accelerate in the second quarter of this year due to stronger momentum in the tech sector.
The country has emerged from a technical recession in the first quarter after its GDP expanded by only 1.1 percent from the fourth quarter and by 0.36 percent from a year earlier, Barclays Bank said in a press release.
The UK lender said the lower-than-expected growth in the first quarter was the result of a contraction in manufacturing that was caused by factors such as a one-time disruption of petrochemical production and a chronic shortage of disk drives that disrupted PC output.
In addition, some sluggishness remained in the pillars of the services sector — wholesale trade and real estate — and in construction, it added.
Barclays said that Taiwan is entering a stronger cyclical upturn and that it expects momentum in exports to accelerate in the second quarter as the technology industry moves into higher gear.
Key drivers for second quarter GDP growth include an easing of the disk drive shortage and a brisk summer launch season in north Asia for a slew of consumer electronics devices, the lender said.
“In Taiwan, companies are already ramping up capacity utilization, as indicated by the recent sharp drop in the number of workers on involuntary unpaid leave,” Barclays said.
“The outlook for investment is also looking up, with a number of semiconductor manufacturers issuing stronger guidance for capital expenditures,” it added.
Barclays forecast Taiwan’s GDP growth at 3.5 percent this year, despite the recent increase in fuel prices and a decision by the government to hike electricity rates.
The bank said it believed that there is scope for Taiwan’s central bank to hike key interest rates at least twice this year, starting with its quarterly meeting next month.
Given the tightening labor market, several companies such as Hon Hai Precision Industry Co (鴻海) and Asustek Computer Inc (華碩) are also mulling wage increases to retain workers, which could pose upside risks to inflation, Barclays said.