Tue, Jan 14, 2020 - Page 12 News List

ANZ sets GDP forecast at ‘healthy’ 2.1%

By Crystal Hsu  /  Staff reporter

Taiwan’s economy is expected to remain healthy this year with GDP growth of 2.1 percent on the back of improving exports and stable domestic demand, but cross-strait relations could affect the tourism sector, Australia and New Zealand Banking Group Ltd (ANZ) said yesterday.

“Stable domestic demand, alongside robust external demand, underpins our positive outlook,” ANZ economists Bansi Madhavani and Raymond Yeung (楊宇霆) said in a report.

Madhavani and Yeung expect domestic demand to add 1.5 percentage points to Taiwan’s GDP this year, and external demand to contribute another 0.6 percentage points, the report showed.

Based on government data, exports are forecast to grow 1.9 percent this year, reversing a contraction of 1.4 percent, the report said.

Manufacturing surveys and production trends already pointed to an incipient recovery, ANZ said, adding that an ongoing revival of the semiconductor industry would benefit the export outlook and the domestic corporate sector.

Global semiconductor sales might register growth of 5.9 percent this year following a 12.8 percent decline last year, ANZ said.

Major local tech firms, such as Taiwan Semiconductor Manufacturing Co (台積電), have raised their capital expenditures to US$14 billion or more due to the increased market penetration rate expected from 5G-enabled smartphones, the report said.

Positive cyclical movements in the technology sector would allow exports and industrial production to stage a comeback in the first half of the year, and a sustained recovery would underpin momentum through the second half, it said.

US-China trade tensions have prompted production migration, which has realigned the electronics supply chain and enabled Taiwan to integrate more in Asia’s value chain, the report said.

Meanwhile, policymakers have introduced incentives to attract investment and encourage local manufacturers to move operations home from China, the report said, adding that business-friendly policies place Taiwan in a position to benefit from a revival in the tech sector, facilitating a 2.5 percent increase in exports next year.

Cross-strait relations might cloud issues for the tourism sector, ANZ said.

Arrivals from Asia accounted for more than 89 percent of all tourists last year, with visitors from China making up nearly 25 percent, it said, adding that it remains to be seen whether Beijing’s restrictions on tourist visits to Taiwan will be kept in place after the elections

However, improvements in growth outlook and stock market performance would support consumer sentiment, ANZ said.

Inflation is likely to remain low, with readings for headline and core consumer prices expected to edge up 0.6 percent and 0.7 percent respectively this year, the lowest in Asia, it said.

Benign inflation would allow the central bank to hold policy rates at 1.375 percent for the year, it said.

The New Taiwan dollar could trade at NT$30 to the US dollar as ongoing currency and capital flows reflect optimism, ANZ said.

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