Fri, Jun 25, 2021 page12

• GDP to grow faster than last year: S&P

  NEARING 6 PERCENT: Companies in the retail, telecom and technology sectors would lead the recovery, while other industries might lag behind, the agency said

  • By Crystal Hsu / Staff reporter
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  Taiwan’s GDP is forecast to expand 5.6 percent this year, faster than a 3.1 percent increase last year, driven by strong global demand for semiconductors, aggressive private investment by local tech firms and an expected recovery in consumer spending, S&P Global Ratings said yesterday.

  Improving external demand and COVID-19 curbs would lend support to credit profiles across economic sectors, even though their paces of recovery vary, said the agency’s local arm, Taiwan Ratings Corp (中華信評).

  The nation’s economic growth is closely tied to the recovery in the Asia-Pacific region and the world as a whole, S&P said, predicting that economic stimulus programs in the US and growing global demand for technology products would continue to fuel strong recovery in the region and Taiwan’s exports for the rest of this year.

  COVID-19 vaccine rollouts might be off to a slow start in the region, but a gradual catch-up in vaccine coverage would lift consumer confidence and spending later this year or next year, it said.

  Taiwan would follow a trajectory similar to its regional peers, S&P said, adding that consumer activity in the nation is taking a hard hit from a local outbreak of COVID-19.

  Taiwan’s export-oriented economy, despite its bright outlook, remains susceptible to global and regional shocks, as well as domestic risks, it said.

  Risks include the threat of a worsening COVID-19 situation and government control measures such as abrupt lockdowns or tight social distancing requirements, it said.

  Draconian measures by different nations to combat the pandemic could derail the region’s economic recovery, and shrink demand for Taiwan’s goods and services, S&P said.

  In addition, escalating tension between the US and China could weigh on Taiwan, especially its technology access, it said.

  Taiwanese firms have thus far showed signs of an uneven revenue recovery, accompanied by mounting leverage, foreign exchange rate swings, volatile commodity prices, and the possibility of water and power shortages, S&P said.

  Credit ratios for most sectors are unlikely to return to pre-pandemic levels until the second half of next year, it said.

  However, active investment in information technology and 5G infrastructure, as well as stable construction demand, would boost credit metrics in the high-tech, cement and steel sectors, it said.

  As a result, firms in the retail, telecom and technology sectors would lead the recovery, while companies in the aviation, oil, gas and automotive sectors would lag behind, it said.

  Soaring shipping freight rates would more than offset elevated operating costs and bolster credit profiles for the container shipping sector, S&P said.

  Airlines would face a protracted recovery due to a stalled passenger increase, despite strong demand, it said.

  Adequate-to-strong capitalization and abundant liquidity would buttress credit profiles in the banking sector and help lenders cushion against a potential rise in credit costs as the pandemic persists, it said.

  Insurers continue to face flat recurring yields and foreign exchange risks, but strong trading gains help support capitalization, aided by a rebound in equity valuation and adequate risk controls, S&P said.
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