DBS, a Singapore-based banking group, said Wednesday that Taiwan’s economic momentum is expected to pick up in 2017, with its gross domestic product (GDP) likely to grow 2.1 percent.
The DBS forecast suggested an improvement from 2016, when the local economy was estimated by the banking group to grow 1.5 percent from a year earlier in reflection of a stronger global economy.
Ma Tieying, a DBS economist, said that based on a forecast by the International Monetary Fund — which said the global economic growth for 2017 will hit 3.4 percent, up from 3.1 percent estimated for 2016 — Taiwan is expected to do better next year accordingly.
She said that Taiwan is likely to climb out of a mediocre 2016. The average economic growth for the first three quarters of this year stood at only around 0.8 percent, according to the bank.
DBS appeared more upbeat than the Directorate General of Budget, Accounting and Statistics (DGBAS), which anticipated in late November that Taiwan’s economy will grow 1.87 percent in 2017 on the back of rising global demand, which is expected to boost the country’s outbound sales. The DGBAS has forecast that Taiwan’s GDP will grow 1.35 percent in 2016.
The DBS economist said that Taiwan will continue to enjoy low interest rates and gentle inflation, adding that the mild recovery in 2017 is expected to prevent the country’s central bank from cutting its key interest rates.
However, the economic growth in 2017 will not be strong enough to prompt the central bank to raise interest rates anytime soon, Ma said. She added that even if the U.S. Federal Reserve raises its key interest rates on the back of the solid U.S. economic growth, Taiwan’s discount rate is expected to remain unchanged at 1.375 percent next year.
In a quarterly policymaking meeting held in late September, the central bank stopped a rate cut cycle by leaving interest rates unchanged, after a series of rate reductions for four consecutive quarters. The central bank is scheduled to hold another quarterly policymaking meeting later in the month.
Low interest rates in Taiwan, along with the Fed’s rate hikes, are likely to propel more funds out of the country, Ma said. The DBS economist said that the mild economic growth in 2017 is expected to improve the local labor market, but added that the improvement could be limited.
She said that the growth of the local consumer price index could hover at around a low level of 1 percent next year, stagnant wages are unlikely to lift inflation by any great extent.
Source: Focus Taiwan News Channel