The nation’s economy might expand by 2.7 percent in the second half, better than the estimated 2.4 percent in the first half, as plans by global technology giants to launch next-generation gadgets will benefit local supply chains, the Capital Group (群益集團) said yesterday.
Led by developed markets, the global economy is to improve from this quarter onward, said Andrew Tsai (蔡明彥), president of Capital Investment Management Corp (群益投顧), the group’s fund managing arm.
The US, which accounts for 70 percent of retail sales among the world’s four largest economies, has added 200,000 non-farm jobs a month this year, boding well for the nation’s export-oriented economy, Tsai told a news conference on the investment outlook for the second half.
Taiwan is home to the world’s leading contract chipmakers, smartphone vendors, laptop producers and critical components suppliers, which will ramp up production to meet expectations of better demand, Tsai said.
Exports could grow 4.8 percent in the second half from the same period last year, accelerating from 2.5 percent in the first half, Capital Group said.
The increase in global purchase managers’ indices above the expansion threshold suggests active business activity ahead, Tsai said.
The trend will encourage private investment that may increase by 5.8 percent in the second half, higher than an estimated 3 percent in the first half, he said.
The Capital Group expects the nation’s GDP growth to register a mild 2.6 percent this year, lower than the upgraded forecast of 2.98 percent by the Directorate-General of Budget, Accounting and Statistics last week.
“Domestic demand may support the nation’s GDP growth this year, while political uncertainty in some emerging countries may be a drag on global recovery,” DGBAS Deputy Minister Luh Dun-jin (鹿篤瑾) said when announcing the revised estimate.
In contrast, the Chung-Hua Institution for Economic Research (中華經濟研究院) said the government estimate remains conservative, saying that the local economy could grow 3.03 percent this year because of relatively strong consumption and investment.
The continued migration of manufacturing facilities to China and Southeast Asia in search of cheap labor costs is likely to limit technological innovation and wage increases at home, the group said.
Overseas production accounted for 51.5 percent of total export orders last year, surging from 13 percent in 2000 and widening the gap between export orders and custom-cleared exports, Capital said.
The migration is hurting domestic labor participation that stood at 58.42 percent in March, lagging behind Japan, the US and Europe at more than 60 percent and much lower than 70 percent in emerging markets, the group said.
The trend also weighs on private investment and perpetuates wage stagnation with current wages lower than 15 years ago, Capital said.
Still, the TAIEX might rally to 9,200 points this year on the back of recovering risk appetite, but could encounter resistance at 9,500, according to the group that owns the nation’s No. 3 brokerage, Capital Securities Corp (群益證券).
Data from the Financial Supervisory Commission shows that in the first quarter of this year, companies listed on the main board and on the over-the-counter market generated NT$6.5 trillion (US$215 billion) in sales, up 4.4 percent from a year earlier.
Over the same period, the copmanies’ net profit grew 9.8 percent to NT$379.5 billion.
JPMorgan Chase Bank shared concerns over Taiwan’s economic easing, but put its forecast for GDP growth at 3.5 percent this year, citing an above-trend global economic showing that is likely to help boost technology demand.
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