Taiwan's economic growth, measured by the gross domestic product (GDP), is expected to reach 5.2 percent this year and 4.3 percent next year, a Deutsche Bank economist said yesterday.
Michael Spencer, the bank's chief economist for Asia, said he expects an end to deflation in Taiwan, with the consumer price index (CPI), which is a major gauge of inflation, rising at an average rate of 0.5 percent this year.
Spencer made the forecast at an "Economic Outlook" conference yesterday in Taipei. He said the stronger growth and an end to deflation may convince the nation's central bank to start bringing interest rates up from abnormally low levels.
However, interest rates are expected to rise more slowly in Taiwan than in the US, with the central bank's rediscount rate forecast to rise less than 50 basis points this year, he said.
Martin Hohensee, the bank's head of fixed income and credit research in Asia, said that global market trends are expected to be dictated by fast growth in the US, a continued weakening trend for the US dollar and the US presidential election.
The bank predicts the US, Taiwan's second largest export market after China, may see a 5.2 percent growth in GDP this year and 4.3 percent in 2005. It predicts EU countries to record an average 1.8 percent growth this year and Japan to show growth of 2.3 percent.
The weakening of the US currency is expected to continue this year, driven by a widening of the current account deficit to 5 percent of GDP in 2004, a higher fiscal deficit and relative low interest rates.
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