British banking group Barclays PLC has forecast that the nation’s GDP will grow 4.5 percent this year because of the sustained economic recovery in the US and a plunge in international crude oil prices.
Barclays’ forecast was more optimistic than that made by the government, which predicted in late November last year that the country’s GDP this year would grow 3.5 percent year-on-year.
In a research note, Barclays senior regional economist Leong Wai Ho (梁偉豪) said the bank had previously forecast that the US economy would grow 2.5 percent this year, but had decided to revise its forecast upward to 3 percent after taking plunging crude oils prices into account.
Leong said he expected investment in production equipment in the US to grow by 7.9 percent this year, beating the 7 percent average increase in the past. Because the US is one of the major buyers of Taiwanese goods, Leong said a general rule of thumb based on historical data is that, when the US economy grows an additional 1 percentage point, Taiwan’s GDP growth should be raised an additional 0.7 percentage points.
Leong said that with the US economy’s growth remaining strong, he was upbeat about Taiwan’s economic climate for this year.
According to the Ministry of Finance, the US accounted for 11.1 percent of Taiwan’s total exports last year.
Leong said that plummeting crude oil prices are also expected to spur consumers worldwide to spend and in turn speed up the pace of an investment cycle, favorable circumstances that should benefit the local high-tech sector, the backbone of the nation’s exports.
The economist said that if crude oil prices average US$50 per barrel for the rest of this year, Taiwan should begin to feel the impact of an increase in production and exports in the second quarter. However, Leong warned that higher interest rates could be on the horizon.
He expected the US Federal Reserve to begin a rate hike cycle in June, after having ended its six-year quantitative easing program in October last year, and said Taiwan’s central bank would likely follow suit at its quarterly policymaking meeting in September. Taiwan’s central bank left its interest rates unchanged for a 14th consecutive quarter after its latest policymaking meeting last month.
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