Taiwan’s economy is likely to grow at a rate of 2.8 percent this year, which would be a solid follow-up to an estimated 5.5 percent increase last year, DBS Bank Ltd (星展銀行) said on Monday.
A slowing Chinese economy would likely weigh on exports from Taiwan, the Singapore-based bank added.
“We project that GDP will grow 2.8 percent this year, a slower rate than the 5.5 percent gain last year, but still in line with the long-term average trend,” bank economist Ma Tieying (馬鐵英) told a videoconference.
Photo: I-Hwa Cheng, Bloomberg
DBS stands by its October forecast, although major barometers have indicated that Taiwan could outperform, Ma added.
Last year’s robust showing would create unfavorable comparison base and China’s slowdown would weigh on exports from Taiwan, she said, adding that China accounts for more than 40 percent of Taiwanese exports.
Domestic demand would pick up, thanks to Taiwan’s successful control of the COVID-19 pandemic, she said.
Taiwan would continue to outperform regionally and finish this year with a 12 percent increase above pre-pandemic levels, Ma said.
By contrast, Singapore, Hong Kong and South Korea would end the year only 2 to 6 percent higher than their levels three years ago, she said.
The boom in the semiconductor sector, led by Taiwan Semiconductor Manufacturing Co (台積電), is shoring up Taiwan’s economy, but the advantage is likely to be less evident this year, with only an 8.8 percent increase forecast for the global semiconductor market, down from last year’s 25.6 percent spike, Ma said, citing data from World Semiconductor Trade Statistics.
While consumer spending this year is expected to shift away from PCs and other electronic devices that support remote working and distance learning, spending on smartphones is likely to grow, driven by people upgrading to 5G devices and recovery of demand in emerging markets, DBS said.
The digital transformation is expected to accelerate, fueling demand for virtual reality hardware, autonomous vehicles and smart factories, among other sectors, it said.
DBS expects the central bank to raise interest rates by 25 basis points this year — raising the rediscount rate to 1.25 percent in September and to 1.375 percent in December — from the existing rate of 1.125 percent.
“The time is ripe for monetary normalization, as the recovery will be broad-based this year,” Ma said.
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