DBS forecasts Taiwan’s economy will grow by at least 2.3% in 2018

Taipei--Singaporean banking group DBS on Tuesday projected Taiwan's 2018 gross domestic product (GDP) growth at 2.3 percent and said its forecast may be upgraded based on the effects of the next generation iPhones on the economy.

In its first forecast of Taiwan's 2018 GDP growth, DBS said Apple's new iPhones are expected to help drive Taiwan's economy in 2017 and 2018 as waves of replacement are likely on their release because of significant upgrades in specifications on their 10 anniversary this year.

The banking group, however, maintained its forecast of 2.5 percent economic growth in Taiwan in 2017. Apple's products are a significant factor in Taiwan's economy because Taiwanese suppliers to the U.S. consumer electronics giant account for about 40 percent of the total market capitalization in Taiwan's equity market.

They include the world's largest contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC) and the world's largest contract electronics maker Hon Hai Precision Industry Co.

With mass production of a new iPhone model likely to be delayed by one or two months until October or November, the effects of the device's release will carry over into 2018, according to DBS.

If this happens, DBS said, it may raise its forecast for Taiwan's 2018 GDP growth higher than 2.3 percent as the local manufacturing sector is expected to benefit.

The new iPhone model, equipped with an organic light-emitting diode (OLED) screen, is reportedly behind schedule because of significant hardware upgrades.

However, other iPhones models are expected to be unveiled in September, giving a boost to Taiwan's electronics sector in the third and fourth quarters, but not enough to push the country's GDP growth past 2.5 percent for the year, DBS said.

It said Taiwan is expected to report slower GDP growth of 1.5 percent in the second quarter after a strong 2.6 percent increase in the first quarter, as the April-June period is usually a slow season in the electronics sector.

DBS also said Taiwan's central bank is unlikely to raise its key interest rates until the second half of next year in light of the expected delayed economic benefits of the new iPhones.

At its most recent policymaking meeting in late June, the local central bank maintained its interest rates with the benchmark discount rate at 1.375 percent for the fourth consecutive quarter.

Source: Overseas Community Affairs Council