DBS Bank Ltd (星展銀行) expects Taiwan’s central bank to raise benchmark rates by 12.5 basis points every quarter through the remainder of this year and next year, lifting the benchmark discount rate by 87.5 basis points to 2.25 percent at the end of next year, DBS economist Ma Tieying (馬鐵英) said in a report.
“That would be within the estimated range of 2 to 3 percent Taylor rule-implied neutral rate,” Ma said in the report issued on March 25.
The Taylor rule, John Taylor’s econometric model that relates actual inflation, desired inflation, real GDP and target GDP, suggests that the US Federal Reserve raises rates when inflation or GDP growth is higher than desired. The rule is often used to predict how a central bank might adjust interest rates.
Photo: Ritchie B. Tong, EPA-EFE
Rate hikes in Taiwan this year and next year should only have a limited impact on household debt, Ma said.
The central bank has introduced four rounds of credit tightening for mortgages to cool the property market and curb household debt growth.
It did not impose further tightening measures last month, which Ma said indicated the bank’s intention to avoid inducing severe pressure on mortgage borrowers.
As liquidity conditions in the banking system remain favorable and local lenders reported a record-low loan-to-deposit ratio of 74 percent, banks might still have the motivation to offer preferential lending rates to expand their loan books given intense competition in the sector, she said.
“Therefore, actual interest costs for mortgage borrowers might not rise sharply in the near term,” Ma said.
DBS in its report revised upward its forecast for Taiwan’s GDP growth this year to 3.8 percent, from the 2.8 percent it predicted in January, citing stronger-than-expected exports and production.
The latest growth prediction compares with the 4.42 percent growth estimate made by the Directorate-General of Budget, Accounting and Statistics.
“The first quarter, which is traditionally a weak season for the electronics sector, is not weak this year,” Ma said.
However, the spread of the Omicron variant of SARS-CoV-2, as well as oil price increases and the war in Ukraine, pose downside risks for Taiwan’s economy ahead, she said.
The government’s relaxation of border controls, quarantine measures and social distancing rules have led to a modest rebound in local COVID-19 cases to about 100 per day since March 19, Ma said.
If a larger-scale Omicron outbreak were to happen in the coming weeks, the nation’s economic recovery would be interrupted in the second quarter, but the effect should be modest and temporary, as about 48 percent of Taiwanese have received a booster shot, she said.
Without the downside risks, Taiwan’s full-year growth could reach 4.5 percent, she added.
HORMUZ ISSUE: The US president said he expected crude prices to drop at the end of the war, which he called a ‘minor excursion’ that could continue ‘for a little while’ The United Arab Emirates (UAE) and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply. Abu Dhabi National Oil Co (ADNOC) is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp said it was lowering production at its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.” The war in the Middle East has all but closed Hormuz, the narrow waterway linking the Persian Gulf to the open seas,
Apple Inc increased iPhone production in India by about 53 percent last year and now makes a quarter of its marquee devices there, reflecting the US company’s efforts to avoid tariffs on China. The company assembled about 55 million iPhones in India last year, up from 36 million a year earlier, people familiar with the matter said, asking not to be named because the numbers aren’t public. Apple makes about 220 million to 230 million iPhones a year globally, with India’s share of the total increasing rapidly. Apple has accelerated its expansion in the world’s most populous country in recent years, bolstered
RATIONING: The proposal would give the Trump administration ample leverage to negotiate investments in the US as it decides how many chips to give each country US officials are debating a new regulatory framework for exporting artificial intelligence (AI) chips and are considering requiring foreign nations to invest in US AI data centers or security guarantees as a condition for granting exports of 200,000 chips or more, according to a document seen by Reuters. The rules are not yet final and could change. They would be the first attempt to regulate the flow of AI chips to US allies and partners since US President Donald Trump’s administration said it rescinded its predecessor’s so-called AI diffusion rules. Those rules sought to keep a significant amount of AI
HEADWINDS: The company said it expects its computer business, as well as consumer electronics and communications segments to see revenue declines due to seasonality Pegatron Corp (和碩) yesterday said it aims to grow its artificial intelligence (AI) server revenue more than 10-fold this year from last year, driven by orders from neocloud solutions clients and large cloud service providers. The electronics manufacturing service provider said AI server revenue growth would be driven primarily by the Nvidia Corp GB300 server platform. Server shipments are expected to increase each quarter this year, with the second half likely to outperform the first half, it said. The AI server market is expected to broaden this year as more inference applications emerge, which would drive demand for system-on-chip, application-specific integrated circuits
RSS