GDP growth will outpace forecasts: HSBC, Moody’s

PLAIN SAILING?:The two firms said they were upbeat on Taiwan’s prospects for the year, partly on the back of demand for tablet PCs and recovery in the US and China

By Crystal Hsu  /  Staff reporter

Thu, Jan 17, 2013 - Page 14

Taiwan’s export-oriented economy may recover faster this year than the government has forecast as regional trade shows healthy returns and the US economy fares better than expected, two foreign companies said yesterday.

HSBC PLC expects the nation’s GDP to increase 4.2 percent this year from last year and Moody’s Analytics put its forecast at 3.8 percent, both higher than the 3.15 percent growth the government predicted in November last year.

“Taiwan starts 2013 on a firmer footing on the back of China’s recovery and better-than-expected US growth,” HSBC Greater China economist Donna Kwok (郭浩庄) said in a report.

External demand will be stronger, led by China and the rest of Asia, which would help anchor the local job market and boost GDP growth to 4.2 percent this year, well ahead of the consensus forecast of 3.4 percent by other foreign institutions, Kwok said. Regional trading partners have taken on a more positive tone from a quarter earlier, pushing the nation back into expansion mode, she said, adding that encouraging data from China indicate that Taiwan looked set to sail into calmer waters.

Moody’s Analytics echoed these views, saying that the dark clouds that have hovered over Taiwan’s economy since 2011 are clearing.

“Taiwan’s economy will likely expand a more respectable 3.8 percent this year” after growing by a disappointing 1.13 percent last year because the downturn in global demand proved deeper than forecast, Sydney-based economist Katrina Ell said in a report.

Better days could be ahead, providing global growth keeps improving, even if the recovery in exports is uneven, Ell said.

Production of smartphones and tablet computers is accelerating, thanks to near-insatiable consumer demand in key markets, she said.

Taiwan is the largest supplier of information and communications technology packaging and testing products, accounting for 51 percent of the global market, according to the Council for Economic Planning and Development.

In contrast, PCs and related products are not faring so well and that sector is likely to move permanently into the slow lane, given the shift in consumer preferences toward more portable devices, Ell said.

Taiwanese firms manufacture 44 percent of desktop PCs and 69 percent of LCD monitors globally, although a high proportion of production takes place in China, and to a lesser extent in Southeast Asia, due to lower labor costs.

However, threats to growth remain as policy uncertainty still clouds the US growth outlook and the eurozone is struggling with a recession, HSBC and Moody’s said.

The central bank may start to normalize interest rates as early as March, especially if the US resolves its fiscal dilemmas, HSBC said.

Moody’s, on the other hand, expects a local shift in monetary policy to take place in the second half of the year.