TAIPEI: Taiwan’s economy could expand 2.1 percent this year from last year, driven mainly by better demand for technology devices, and the growth might reach 3.1 percent if the technology sector puts in an exceptional performance, DBS Bank Ltd said.
However, the central bank could keep interest rates unchanged for the entire year to check a negative output gap, the Singaporean lender said in a report.
Our base-case scenario sees moderate growth of between 2 percent and 2.5 percent, consistent with the nation’s average growth in the last five years, DBS said.
The nation’s economy closely follows the global technology cycle and has emerged from a slowdown since the second quarter of last year, thanks to its export-oriented technology sector and resilient domestic demand, DBS said.
The acceleration of the US’ recovery and stabilization in the Chinese economy amid a series of reforms lend support to external demand as the two markets account for 50 percent of Taiwanese exports, it said.
While it is unlikely the uptick will stall given that the National Development Council’s indices show a positive trend, DBS said the momentum is unlikely to gain too much traction in light of the slowdown in the purchasing managers’ index.
This suggests the economy is at the early to mid-recovery phase, not at the beginning of the recovery cycle, DBS said.
If Taiwan’s economy expands at 2.1 percent, the output gap will remain negative in the coming four quarters, prompting the central bank to hold interest rates throughout the year to support growth, DBS said.
Under the best-case scenario the output gap could turn positive and GDP growth could hit 3.1 percent, DBS said.
Upside surprises are not impossible as expectation is building that Apple Inc plans a major product redesign for the iPhone’s 10th anniversary this year, it said.
Taiwanese firms supply chips, camera lenses, batteries, casings, touch panels and other parts to the US technology company.
Electronic components drive almost all of the growth in industrial output, up from 60 percent of growth in 2014, the bank said.
