ANZ Taiwan expects the nation’s economy to expand a healthy 5.3 percent this year from last year with the second half to see stable external demand for consumer electronics and a stronger service sector because of the opening to independent Chinese tourists.
“We expect Taiwan’s GDP to continue healthy expansion amid moderate inflationary pressures in the second half as in the first six months,” Hong Kong-based ANZ economist on Greater China Raymond Yeung (楊宇霆) told a media briefing in Taipei yesterday.
Taiwan’s GDP was likely to have increased 4.3 percent year-on-year last quarter after growing a stronger-than-expected 6.55 percent in the preceding quarter thanks to -robust global demand for electronic products, Yeung said.
That almost corresponds to a 4.64 percent growth for the second quarter the nation’s statistics bureau forecast in May, with data slated for release next month.
While the technology cycle has showed signs of slowdown lately, it may stay in healthy territory for the rest of the year, benefiting Taiwan’s export-focused economy, he said.
The service sector, which has taken a backseat in driving GDP in recent years, may make a bigger contribution as a result of Taiwan’s warming ties with China, ANZ Taiwan said. Estimates show the Chinese free independent tourist (FIT) program and the related consumption would lift Taiwan’s GDP by 0.2 percent in the second half, providing Chinese FITs spend US$2,800 each, Yeung said.
“Taiwanese retailers and hotel operators have increased investments and hiring to cash in on the program,” he said. “Related benefits will become more evident next year and the government is likely to ease the rules further.”
The Australian banking group expects the FIT program to raise Taiwan’s GDP by 0.6 percent next year, creating more job opportunities and slashing the nation’s dependence on exports, making it less sensitive to global economic changes.
Recovering domestic demand is expected to push up inflationary pressures with the consumer price index (CPI) to climb above 2 percent in the entire second half and average 2.3 percent for this year, Yeung said.
The government’s inflation reading stood at 1.93 percent last month and is forecast to rise to an average of 2.1 percent this year.
Against the backdrop, the central bank is likely to stand by its mild pace of hiking interest rates by 12.5 basis points in September and December each unless the CPI sees a sharp pickup, the economist said.
“The scenario is unlikely this year, but has a fair chance next year,” if the economy of the US, the major consumer of global electronics, recovers fast enough, Yeung said.
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