Taiwan’s GDP growth may accelerate to 3.9 percent this year, from 1.25 percent last year, on the back of an expected rebound in the global technology cycle, though Europe’s debt crisis remains a major drag on the growth outlook, Standard Chartered Bank Taiwan said recently.
The recent uptrend in Taiwan’s economic data — industrial production, capital goods, imports and export orders — suggests continued improvement for the nation’s export-oriented economy after a global slowdown, thanks to China’s recovery and steady growth in the US, Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said in a report.
The ongoing rebound in the technology cycle will lend strong support to growth prospects considering that the sector accounts for more than one third of Taiwan’s manufacturing sales and exports, Phoo said.
“This should lift producers’ confidence and bodes well for capital expenditure and hiring,” he said.
The British banking group is more optimistic than the Directorate-General of Budget, Accounting and Statistics, which last month predicted 3.53 percent GDP growth for this year.
On the domestic front, growing optimism about household incomes and a steady job market may buttress consumer confidence and the overall economy, Standard Chartered said, after the jobless rate dropped to a three-year low of 4.18 percent in December last year.
The bank expects the nation’s domestic demand to benefit from increasing tourist arrivals, particularly from China after the number of Chinese tourists topped 2 million last year, from 1.78 million in 2011.
The figures are poised to climb higher this year as Taiwan and China continue to liberalize tourism flows, thereby boosting tourist spending and increasing employment in the tourism and retail services sectors, Phoo said.
“In short, the near-term growth outlook for Taiwan appears to be much better than one year ago,” he said.
However, the economist voiced concerns that Taiwan will lose competitiveness compared to major regional trading rivals in the long run, unless significant efforts are made to reinvigorate the potential for growth.
“There is room for improvement in terms of labor efficiency as well as the need to enhance the overall macroeconomic environment,” Phoo said.
The lack of success or difficulty among Taiwanese manufacturing firms is shifting away from being low-cost, middle-man producers contributed to the stubbornly stagnant wages that have also taken a toll on domestic consumption and stifled growth potential, Phoo said.
The number of new college graduates with a starting monthly salary of less than NT$30,000 jumped to 37 percent in 2010, from 25 percent in 2004, as the overall share of labor income to GDP fell to a record low, he said.
The transformation to an “own-brand” producer is not easy, but it is necessary to stay competitive, Phoo said.