Thu, Mar 30, 2017 - Page 12 News List

Think tank expects GDP to rise 2.1%

PICKUP:Yuanta-Polaris expects a recovering global economy to lift Taiwanese exports, especially tech products, but also attributes growth to a low comparison base last year

By Crystal Hsu  /  Staff reporter

Yuanta-Polaris Research Institute (元大寶華綜經院) yesterday raised its GDP growth forecast for this year to 2.1 percent — from the 1.8 percent it made three months earlier — on expectations that the nation’s export-oriented economy would benefit from an upturn in the global technology cycle and a low comparison base.

The revision made Yuanta-Polaris the first local think tank to raise its growth forecast above the 2 percent mark. The figure is also higher than the Directorate-General of Budget, Accounting and Statistics’ forecast of 1.92 percent.

“With the exception of retail sales, all economic indicators have fared stronger than expected thus far, thanks to a recovering global economy, allowing [Taiwanese] exports to benefit from the tailwind,” Yuanta-Polaris president Liang Kuo-yuan (梁國源) told a news conference.

The nation is home to the world’s major chipmakers, chip designers, and suppliers of camera lenses and other electronic components used in smartphones, personal computers, connected vehicles and Internet of Things applications.

The improvement has more to do with a low comparison base and inventory adjustments last year, and might lead policymakers to ignore structural problems that have constrained economic growth, Liang said, adding that a 2.1 percent GDP growth still lags behind the long-term average.

Liang also voiced concerns that a sharp appreciation in the local currency would erode exporters’ profits, although the rise of global value chains has weakened the impact of foreign-exchange rates on export volume.

That means exporters would go ahead and take orders, despite losses to retain clients, he said.

“Companies may continue the practice until they deem exchange rates intolerable,” he said.

The Taipei-based think tank now expects the New Taiwan dollar to trade at an average of NT$31.3 against the greenback this year, significantly up from the NT$32.7 it predicted three months earlier.

Other research institutes will also find drastic revisions necessary, as the central bank has refrained from intervening in the currency market in hopes that the US Department of the Treasury would remove Taiwan from its currency watch list, Liang said.

The central bank might maintain this position until after the US agency updates its currency monitoring list on April 15, he said.

As for the Executive Yuan’s proposed special expenditure to boost sources of renewable energy and digital infrastructure, Liang said it appears to be targeted at meeting demand on the local government level and might have limited success in spurring foreign or private investments.

The budget for sources of renewal energy and digital infrastructure accounts for only 10 percent of the proposed NT$882.49 billion (US$29.14 billion) eight-year Forward-looking Infrastructure Construction Project and is too small to address the nation’s tight power and water supply as the government aims to decommission nuclear power plants ahead of schedule, the economist said.

Taiwan Semiconductor Manufacturing Co (台積電) recently listed the US as a possible location for its most advanced fab if the government cannot solve potential water and power shortages.

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