Goldman Sachs Group Inc said in a recent report that it has maintained its GDP growth forecast for Taiwan of 6.3 percent for the year, despite lingering political volatility since the March 20 presidential election.
The company also predicted that the New Taiwan dollar will strengthen to NT$31 to the US dollar by the end of the year.
The forecast is supported by the nation's strong exports, mainly to China and the US, which have recovered from a setback in November, according to the report.
"Growth momentum in China, a crucial factor in the latest upturn in Taiwan's export sector, is strong and will likely remain so," the report said.
sales to China
Taiwan exported goods worth US$35.4 billion to China last year, up 20 percent from a year ago, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said last month. The Ministry of Economic Affairs last month reported that export orders from China in February were US$3.47 billion, a 16.4 percent rise from January. The US also placed orders of US$4.02 billion, a 8.41 percent increase from the previous month.
Strong domestic demand is also fueling GDP growth.
"Capital expenditure has staged a sharp rebound since the fourth quarter of last year, with the import of capital goods rising at the astonishing pace of 114 percent quarter-on-quarter."
Goldman Sachs also voiced concerns about President Chen Shui-bian's (陳水扁) vow to push for a new constitution, which is likely to spark cross-strait political tensions. Goldman Sachs also pointed to the delay in opening direct links with China, which the company said was crucial for Taiwan's next stage of development.
In addition to Goldman Sachs, global investment bank Lehman Brothers said last month that it predicted Taiwan's GDP growth will stay at 6 percent, fueled by the nation's robust exports to China and a sharp rise in foreign reserves.
Although economists have been consistent in stating confidence in Taiwan's economic outlook this year, consumer confidence and the stock market appear to have failed to match the optimism.
A poll by National Central University last month indicated that consumer confidence has crumbled in the face of political uncertainties, dropping 4.18 percent to 79.52 points, the lowest level since October last year.
After losing 455.17 points in the first trading after the election to close at 6,359.92 points, the domestic stock market climbed back somewhat to 6,545.54 yesterday.
expected bounce
Cheng Cheng-mount (鄭貞茂), vice president of Citibank Taiwan, said although the lackluster stock market reflected investors' fragile confidence, the TAIEX is not a major barometer to measure a country's economic growth. Furthermore, the TAIEX may bounce higher once the uncertainty is removed, Cheng said.
Wei Duan (
"As we observed, those who protest in front of Presidential Office still go about their economic activities," Wei said. "The large-scale protest even prompted consumption."
However, Wei expected that economic growth for the year will be about 5 percent, dented by possible investment migration.
"Some investors, regardless whether they are local or overseas, may lose confidence in the country due to the tedious political rows that have lasted unexpectedly long," Wei added.
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