DBS Bank Ltd yesterday revised upward its forecast for Taiwan’s GDP growth this year to 0 percent, compared with the minus-1 percent estimate it made in April, citing the nation’s success in containing the COVID-19 pandemic and competitiveness in the technology sector.
The adjusted forecast came after a quarterly contraction of 8.8 percent in the second quarter was more moderate than expected, DBS economist Ma Tieying (馬鐵英) said in a report.
The lender expects Taiwan’s economy this quarter to post a 7 percent quarterly gain followed by a quarterly increase of 2 to 3 percent in the fourth quarter, Ma said.
Photo: I-Hwa Cheng / Bloomberg
With the number of domestic COVID-19 cases in Taiwan contained at near zero for about 100 consecutive days, Taiwan’s retail and recreation activities, as measured by Google’s location services data, almost normalized last month, compared with a 6 percent fall in June and a 12 percent decline during the April-to-May period, she said.
A second wave of infections, which would be a drag on economic recovery in many countries, would not affect domestic demand, given that there has been no tightening of COVID-19 restrictions after most of them were lifted in June, she added.
However, a second wave of infections and renewed lockdowns in other countries could indirectly hurt Taiwan, as the US, Europe and Japan, where the number of COVID-19 cases is resurging, are important export markets for Taiwan, accounting for a combined share of about 30 percent of exports, Ma said.
Private investment is likely to grow, given that Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) last month revised up its capital expenditure plan for this year to top US$17 billion, from an original budget of US$15 billion to US$16 billion, Ma said.
TSMC is also likely to benefit from Intel Corp’s plan to outsource some chip production to a third-party due to the delay in its 7-nanometer rollout, as well as Apple Inc’s plan to replace Intel processors used in Mac computers with chips designed in-house, she said.
For the second half of this year, the geopolitical picture is complicated, as China-US tensions look set to intensify as the US presidential elections near, Ma said.
Chip orders received by Taiwanese firms and their South Korean peers from China’s Huawei Technologies Co (華為) would likely decline from September, when the 120-day grace period of the US’ technology ban expires, she said.
Should Washington adopt broader sanctions on Chinese tech companies and Beijing move to retaliate by restricting US tech firms’ operations in China, it would further hurt Taiwanese businesses highly involved in the US-China tech supply chain, she said.
Meanwhile, DBS said it expects Taiwan’s central bank to keep its policy interest rate unchanged at 1.125 percent throughout the year.
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