The nation's economy is forecast to expand by 5 percent this year, driven by rising demand for its electronic devices from around the globe, investment bank Lehman Brothers said in a report released yesterday.
The nation's trade-laden economy will join Asian peers in enjoying strong growth this year due to low real interest rates, better economic fundamentals and other positive structural forces, according to Lehman Brothers.
"In Taiwan, the economy is geared to an upswing in global high-tech demand, while we are also encouraged by solid growth in consumer credit, which could interact positively with the property market," Lehman Brothers' economist Rob Subbaraman said in the report.
The forecast, if achieved, would be the nation's strongest economic expansion in three years.
Subbaraman projects that GDP will expand 5 percent this year from his estimate of 3.9 percent growth last year. But Taiwan will still lag behind South Korea, which is forecast to enjoy 6 percent GDP growth.
Taiwan outpaces South Korea in one segment, however, as the world's biggest supplier of liquid-crystal-display (LCD) panels for computers and TVs.
The sector is likely a main driver of growth. AU Optronics Corp (
Subbaraman's outlook is far more optimistic than other forecasts. For example, the government's Directorate-General of Budget, Accounting and Statistics (DGBAS) projects 4.08 percent growth.
The DGBAS is slated to release the GDP growth figure for the fourth quarter of last year tomorrow. The agency said on Nov. 17 that it expected expansion for the quarter to be 5.28 percent, translating into full-year GDP growth of 3.8 percent.
Still, Lehman Brothers warned that a downside risk for the Taiwanese economy is a South Korea-style credit bubble.
Currently, bad loans incurred from credit-card holders are around NT$20 billion, or about 2.5 percent of the total NT$800 billion loans to credit-card holders, according to financial regulators.
Looking at the region excluding Japan, Subbaraman said oil price and inflation could pose a risk to economies, especially for those that are heavily dependent on imported oil -- if oil prices stay around current levels.
"Asian governments have scaled back fuel subsidies, so a renewed [rise in] oil prices could boost inflation and hurt growth more than before," he said.
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