Australia and New Zealand Banking Group (ANZ) yesterday significantly raised its forecast for the nation’s GDP growth this year and next year as local technology firms outperform their regional rivals by shifting production back home to ease the impact of a US-China trade dispute.
ANZ expects the economy to expand 2.3 percent this year and 2.1 percent next year, up from 1.8 percent and 1.5 percent respectively, propelled mainly by a strong private investment.
“Taiwan’s GDP growth surprisingly outperformed that of other Asian electronics exporters, namely South Korea and Singapore, prompting us to reassess our forecast,” ANZ greater China senior economist Betty Wang (王蕊) said.
Government policy measures have been successful in bringing back manufacturers of high-value products, which would provide support to private investment and exports in the short term, Wang said after visiting Taiwan.
Several large Taiwanese manufacturers have shifted their production lines back home, and factory space and equipment are available in industrial areas, enabling production to commence quickly, Wang said.
Private investment, a key GDP component, jumped 5.2 percent in the past five quarters, while machinery imports, a barometer of corporate investment, surged an average 18 percent per month this year, she said.
There are also signs of recovery in the global semiconductor industry, lifting the outlook of the Taiwanese technology sector, she added.
A better-than-expected reception for new-generation smartphones is shoring up sentiment this quarter and a pickup in 5G demand from China could maintain the momentum going into next year, Wang said.
However, the relocation of production is not perennial and its magnitude could also be capped by supply constraints, such as labor and electricity, she said.
The recovery in the global semiconductor sector is not yet well-established given that corporate revenues are still declining, albeit at a slower pace, she added.
“As such, we remain cautious about Taiwan’s growth outlook in the second half of the year, not to mention the uncertainties surrounding the China-US trade negotiations,” Wang said.
An improved outlook for the semiconductor sector reinforces the view that the central bank would maintain its key policy interest rate at 1.375 percent for the foreseeable future, ANZ said, adding that the bank is under no pressure to cut its policy rates unlike its peers overseas.
A stock market rally amid robust inflows of foreign funds has boosted consumer sentiment and kept private consumption steady, it said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
RSS