Taiwan’s economy could expand 4.2 percent this year compared with a tepid 1.2 percent growth last year, as recovering Chinese demand is expected to ramp up industrial activity and warming cross-strait ties are to continue boosting the service sector, DBS Bank (星展銀行) said yesterday.
“The recent growth momentum in exports will be sustained this year on the back of a cyclical recovery in the Chinese economy and close trade links across the Taiwan Strait,” the Singaporean banking group said in a report.
The upturn in exports may boost local industrial activity, the report said. While the mainstream view attributes the rise in local exports to improved US demand, DBS said it had more to do with China.
Electronics orders from China increased significantly since September last year and boosted Taiwanese electronics exports, DBS said.
An adjustment in foreign exchange rates this year could also benefit Taiwanese exporters, DBS said, adding that it expects the Korean won to outperform the local currency due to more foreign participation in financial markets, stronger GDP growth and higher interest rates in South Korea.
Private consumption may also improve this year, as the impact of electricity price hikes dissipates and the effect of the capital gains levy on securities might not kick in until the TAIEX rallies above the 8500-point mark, DBS said.
Meanwhile, tourism sectors will remain the bright spot in the economy due to closer ties with China, the bank said. Chinese arrivals rose 52 percent in the first 10 months of last year, on track to reach 2.5 million people for the entire year, DBS said.