The nation’s economy might expand 3.7 percent next year after achieving a better-than-expected increase of 3.6 percent this year, as the firm recovery of the US might offset weakness in Europe and global financial market uncertainties, Australia and New Zealand Banking Group (ANZ) said in a recent report.
“Taiwan’s export-oriented economy appears to move more in tandem with advanced economies than with the Chinese economy,” Hong Kong-based ANZ senior economist Raymond Yeung (楊宇霆) said in the report.
The firm recovery in the US — the largest market for consumer electronics, devices and components — might offset a slowdown in China as well as the disappointing showing in Europe and Japan, Yeung said.
Yeung said Taiwan’s economy might report a better-than-expected 3.6 percent increase this year, riding on the launch of Apple Inc’s new handsets, as major Taiwanese technology firms were in the supply chain for the popular iPhone 6.
“Taiwan owes its solid recovery this year mainly to resilient external demand and improving domestic activities,” Yeung said.
Looking ahead, the US might continue to lend support next year, while declining crude oil prices would lower inflationary pressures, the report said.
The Australian banking group expected Taiwan’s consumer price index to ease to 1 percent next year, from an estimated 1.5 percent this year, the report said.
The softening inflationary pressures drove ANZ to push back its rate hike projection to September next year from March, the report said.
The low inflation environment merits a wait-and-see approach, while wild volatility in currency and crude oil markets pose downside risks to global growth prospects, the report said.
ANZ also saw the risk of weakening domestic consumption, given limited room for earnings improvement ahead, despite mild inflation.
Household disposable income growth has failed to catch up with GDP growth, hindering the growth of consumption, the report said.
“That explains why Taiwan’s consumer sentiment ranks the lowest among Asian economies,” the report said.
Major manufacturers are moving their production bases offshore, but local service sectors have not caught up with economies like Hong Kong and Singapore, the report said.
Taiwan’s fortune has been based on the recent boom of handheld devices and its ability to secure contracts, notably with Apple, leaving its economy vulnerable to the fate of select global supply chains, Yeung said.
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