The Yuanta-Polaris Research Institute (元大寶華綜經院) yesterday raised its forecast for GDP growth this year from 3.1 percent to 4.4 percent on the back of strong exports, but said that the showing would not be exceptional globally, giving the New Taiwan dollar little room to increase further against the US dollar.
Taiwan’s tech firms have gained importance in global electronics supply chains amid US-China trade tensions and the COVID-19 pandemic, making them major beneficiaries of the remote work and learning trends, as well as enhanced safety stock levels, Yuanta-Polaris president Liang Kuo-yuan (梁國源) said.
The phenomenon, referred to as the bullwhip effect, helps account for the unprecedented prosperity local electronics makers experienced last year and this year, Liang said.
Photo: Wu Chia-ying, Taipei Times
Exports might grow 5.16 percent this year, up from the previous forecast of 5 percent, while imports might increase 3.97 percent, down from 4.07 percent, the Taipei-based think tank forecast.
Private investment could expand 4.07 percent, while consumer spending might grow 3.73 percent, it said.
With projected GDP growth of 4.4 percent, Taiwan would rank somewhere in the middle worldwide, behind major economies such as the US and China, explaining why the NT dollar has lost some momentum against the greenback, it said.
“Global capital has ... flowed to the US market to pursue better investment opportunities,” Liang said.
Yuanta-Polaris expects the NT dollar to trade at an average of NT$28.5 this year versus the greenback. The local currency closed at NT$28.538 against the US dollar in Taipei trading yesterday.
Taiwan’s robust exports would continue to bolster its current account surpluses and countries with strong trade surpluses are unlikely to have a weak currency, Liang said.
The central bank would refrain from intervention next quarter, when the US is due to update its currency report after placing Taiwan on its watch list for currency manipulation in December last year, he said.
Taiwan meets two of the three criteria by having a trade surplus with the US of US$20 billion or more and a current account surplus in excess of 2 percent of GDP, but it can contest the criterion regarding one-sided intervention in the foreign exchange market, he said.
“Taiwan had better shake off currency manipulation charges or it might attract punitive measures from the US, the world’s largest economy,” Liang said.
While the pandemic poses the biggest uncertainty to the global economy, Taiwan should strive to solve water, land, electricity, labor and talent shortages that went unnoticed until the water shortage worsened, he said.
The government should learn from major tech firms in recycling wastewater or the problem could thwart the nation’s industrial development, he added.
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