DBS Bank Ltd yesterday revised upward its GDP growth forecast for Taiwan to 5.5 percent this year, from the 5 percent it predicted in April, citing better-than-expected investments.
Imported capital goods advanced 63.5 percent in August, indicating that local manufacturers, especially those in the semiconductor industry, increased their investments, Singapore-based DBS economist Ma Tieying (馬鐵英) told a videoconference.
Data for last month had not been released, but the momentum in July and August should have remained intact last month, Ma said.
Photo: Lee Chin-hui, Taipei Times
“With annual growth of 7.4 percent, Taiwan’s economy in the second quarter was brisker than expected,” she said.
“We also boosted our forecast for the third quarter to 4 percent, from 3.8 percent predicted in April, due to strong investment and recovering consumption in July and August,” she added.
However, the bank slashed its growth estimate for the fourth quarter from 3 percent to 1.8 percent, as export growth might slow to a single-digit rate compared with an annul rise of 31 percent in the first eight months of this year, Ma said.
“Exports will likely face headwinds, as demand from China could decline due to the country’s power rationing, which would limit production of Chinese electronics companies,” she said. “China is the largest market in terms of exports of intermediate electronics from Taiwan.”
Taiwan’s exports to China, including Hong Kong, have increased at declining rates for five months in a row, from 35 percent annual growth in March to 16 percent in August, she said.
Taiwan’s exports to Southeast Asia also slowed last month, with nations in the region reporting COVID-19 outbreaks that interrupted production and reduced import demand, Ma said.
“These negative factors have not fully been reflected on Taiwan’s economy and might become more obvious in the fourth quarter,” Ma said. “In an even worse scenario, these factors could continue existing and slowing the local economy in the first quarter next year.”
DBS Bank’s 5.5 percent growth forecast is lower than the 5.88 percent predicted by the Directorate-General of Budget, Accounting and Statistics (DGBAS).
The bank predicted 2.8 percent growth next year, also lower than the DGBAS’ 3.69 percent projection.
The central bank would stay put this quarter, as the labor market has not improved much, Ma said.
However, it might raise its policy rates in the second quarter of next year at the earliest, if employment improves, she said.
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