Taiwan’s economy will grow faster than expected this year as the launch of new gadgets such as Apple’s iPhone 6 helps to offset any drag from the uncertain recovery of its key trade partners.
The bright prospects for the export-driven economy come as China and the United States, Taiwan’s two biggest trading partners, are showing sub par economic data highlighting the fragile global recovery.
“Taiwan’s economy in the second half of this year will not necessarily be affected by global factors due to the release of iPhone 6,” said Tsai Hung-kun, a director of the Directorate General of the Budget, Accoutning and Statistics (DGBAS).
Taiwan is a key supplier to Apple Inc with contract manufacturers on the island making everything from semiconductors to camera modules to casings and then assembling the gadgets for the new smartphone.
Taiwan’s statistics agency on Friday said gross domestic product will grow 3.41 percent in 2014, which would be the fastest since 2011. It was also an upward revision from its previous estimate for a 2.98 percent expansion.
The agency also said that Taiwan grew 3.74 percent in the second quarter, slightly lower than its initial reading of 3.84 percent.
Growth in the third quarter is expected to slow slightly to 3.62 percent and a further 3.08 percent in the fourth quarter from a year earlier, the agency said.
The government cited tech gadget releases, solid handheld device demand and stable consumption at home as main drivers of growth in the second half of the year.
DGBAS minister Shih Su-mei said: “The Taiwan domestic economy is recovering and on a stable track.”
“Semiconductor exports are benefiting from continued external demand in mobile devices,” she said, adding that “semiconductor firms continue strong capital investment growth.”
Pressure on Rates
The economy of China, Taiwan’s biggest trading partner, showed further signs of softening in July despite a burst of government stimulus measures, suggesting more policy support may be needed to keep growth on track as a property downturn worsens .
Taiwan’s strong growth estimate for 2014 has raised the possibility the central bank will hike interest rates before the year-end.
Analysts expect Taiwan’s central bank to keep rates steady at its next quarterly meeting in September as inflation stays manageable, but rates could be raised by the fourth quarter of this year or the first quarter of next.
Taiwan forecast its inflation rate, as measured by the consumer price index, to rise 1.64 percent this year, slightly higher than an earlier estimate for a 1.53 percent increase. In 2015, inflation should be 1.46 percent, the agency said.
“The pressure from inflation is not really that great right now,” said Sonny Hsu, a vice president with Moody’s Investor Service. (Reuters)