Taiwan Upgrades Growth Forecast

By Fanny Liu And Jenny W. Hsu 

TAIPEI--Taiwan's government on Friday raised its 2014 growth forecasts, citing stronger exports of electronics and cars and resilient domestic demand.

The economy should expand 3.41% this year, up from previous forecast of 2.98%, the Directorate General of Budget, Accounting and Statistics said. After logging the strongest growth in three years in 2014, Taiwan's gross domestic product could rise more quickly at 3.51% next year, it said.

Exports, accounting for two-thirds of GDP, are expected to rise 3.21% this year, the agency added. It is better than its previous forecast of 3.1% and a 1.41% growth last year.

Taiwan plays a central role in the global electronics supply chain. Orders for Taiwanese components from tech titans including Apple Inc. and Microsoft Inc. have been climbing for months, ahead of product releases slated for later this year. Taiwan's major export markets--the U.S. and China--are also recovering, albeit at an uneven pace.

As exports grow, domestic demand also gets a lift. The government and private sector have been hiring staff, raising wages and building new facilities.

Private consumption will likely grow 2.62% this year--better than an earlier estimate 2.58% and a 2.02% rise in 2013. Investments by the private sector are expected to rise 4.83% in 2014, picking up from 4.73% previously forecast.

"U.S. economy continues to improve and the Euro-zone is steadying, but emerging economies--led by China--are going through structural reform and that is limiting the pace of the global recovery," the agency said in a statement.

"Also, geopolitical tensions may hit financial markets and commodity prices, adding uncertainties to the global outlook," it added.

Standard Chartered economist Tony Phoo said: "The ongoing recovery in the U.S. will continue to benefit Taiwan's exports in the coming months, or even through the first half of 2015."

Mr. Phoo said Taiwan's economy is shifting to a faster gear. He expects GDP in the second half will likely rise 4% from a year earlier.

But some other economists said Taiwan's current upturn is largely pulled by Apple's products, and not so much by a general strengthening of global electronic demand. Once the product launches are over, orders placed with Taiwanese manufacturers could take a hit.

The agency expected the consumer-price index will rise 1.64% this year. It is higher than its previous estimate 1.53% but still within the central bank's tolerance of 2%. That means the central bank may keep its monetary policy accommodative to promote economic growth, analysts say.