DBS Bank yesterday raised its forecast for the nation’s GDP growth for this year to 2.5 percent, from an earlier projection of 2.1 percent, as major economic barometers have proved stronger than expected.
“The start of this year appeared to be stronger than forecast, thanks to a recovery in exports and inventory restocking in the manufacturing sector,” the Singaporean banking group said.
DBS said it is looking for about a 3 percent increase in GDP this quarter from the same period last year, but it is not clear if such a pace of growth is sustainable.
The 0.23 percent contraction during the January-to-March period last year helped to lower the comparison base and make it easier to improve, the bank said.
The bank’s growth forecast for this quarter is higher than the 2.45 percent increase the Directorate-General of Budget, Accounting and Statistics (DGBAS) forecast last month.
Tailwinds could come from the release of Apple Inc’s iPhone 8 in the second half of the year and a pickup in the US economy later this year, DBS said.
The US firm is rumored to be introducing a major redesign and upgrade of its flagship handset to mark its 10 anniversary, spurring substantial replacement demand.
Headwinds could come from tighter US trade barriers and a slowdown in the Chinese economy, as the market accounts for 40 percent of Taiwanese exports, DBS said.
The bank also raised its inflation forecast for this year from 1 percent to 1.2 percent, citing higher crude oil prices of about US$55 a barrel.
New domestic labor rules that require higher overtime pay and more holidays are helping to raise inflation expectations, the bank said.
DGBAS Minister Chu Tzer-ming (朱澤民) said the new rules would not affect the nation’s economy based on his agency’s calculations.
Chu agreed inflation would rise if the New Taiwan dollar continues to weaken and thereby drive up import costs.
Inflation would rise 0.2 percentage points for every NT$1 decline against the greenback, Chu said.
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