Taiwan Grew Faster-Than-Expected as Exports Weathered Risks
Taiwan Grew Faster-Than-Expected as Exports Weathered Risks
Maurice Tsai/Bloomberg
Taiwan’s exports are equivalent to more than half of its $355.5 billion economy and rose for nine straight months through July, propelling first-quarter GDP growth at the fastest pace since 1978.
Taiwan’s exports are equivalent to more than half of its $355.5 billion economy and rose for nine straight months through July, propelling first-quarter GDP growth at the fastest pace since 1978. Photographer: Maurice Tsai/Bloomberg
Taiwan’s economy expanded more than forecast last quarter, bolstering the case for further interest rate increases after the island’s exports weathered global risks.
Gross domestic product grew 12.53 percent in the three months through June from a year earlier, after climbing a revised 13.71 percent in the first quarter, the statistics bureau said yesterday in Taipei. The figure beat the 10.15 percent median estimate of 14 economists in a Bloomberg News survey.
Taiwan’s expansion affirms the resilience of non-Japan Asia to slowdowns in the U.S. and China after Malaysia reported growth of 8.9 percent this week and Hong Kong’s GDP exceeded forecasts. Rising consumer and housing prices may prompt the central bank to add to June’s unexpected decision to raise the benchmark rate from a record low.
“The growth looks well above consensus, which increases the odds of rate tightening in September and December,” said Dariusz Kowalczyk, a Hong Kong-based senior economist at Credit Agricole. “The Taiwan dollar is likely to come under upward pressure, possibly triggering central bank intervention.”
Taiwan’s exports are equivalent to more than half of its $355.5 billion economy and rose for nine straight months through July, propelling first-quarter GDP growth at the fastest pace since 1978. The economy, which contracted in 2009, will expand 8.24 percent in 2010 and 4.64 percent the year after, the statistics bureau forecast yesterday.
Taiwan Dollar
Policy makers intervened to cap gains in the Taiwan dollar during the past four months amid the rebound in overseas shipments, traders who declined to be identified said. The local dollar rose 0.1 percent to NT$31.93 against its U.S. counterpart yesterday in Taipei, according to Taipei Forex Inc., and has climbed 0.2 percent this year. The Taiex share index closed 0.1 percent higher ahead of the GDP report.
The global recovery enabled exporters including Hsinchu- based Taiwan Semiconductor Manufacturing Co., the world’s largest custom manufacturer of chips, and Miaoli-based Chimei Innolux Corp., Taiwan’s biggest maker of liquid-crystal displays, to post second-quarter net income that beat forecasts.
Shipments to China, which together with Hong Kong absorbs more than 40 percent of Taiwan’s exports, rose 38.8 percent in July from a year earlier even as import growth eased in the world’s fastest-growing major economy. Exports overall will advance 33.2 percent this year, up from an earlier forecast of 24.5 percent, the statistics bureau said.
Property Bubble
“The second-quarter reading fared better than market expectations, thanks to demand at home and overseas spurred by economic recovery in Asia,” said Cheng Cheng-mount, chief economist at Citibank Taiwan Ltd. The central bank will increase the benchmark rate by 0.125 percentage point next month to ward off a bubble in property prices, Cheng said.
Taiwan’s central bank raised the benchmark rate in June for the first time since 2008, executing a 0.125 percentage point increase to 1.375 percent. It also introduced mortgage restrictions, including a 70 percent cap on loans for second homes, after low borrowing costs fueled lending and a jump in housing prices, stoking concerns of a property market bubble.
House prices in metropolitan Taipei gained 20 percent last year and may climb 10 percent this year, Lee Jain-ming, a researcher at Sinyi Realty Co., said in May. Central Bank Governor Perng Fai-nan wrote to the chairmen of all financial institutions on the island last month, asking them to take steps to prevent housing speculation after complaints from citizens.
Consumer prices have also been rising, advancing 1.31 percent in July, the seventh straight monthly gain. Full-year inflation will be 1.23 percent, down from an earlier forecast of 1.4 percent, the statistics bureau said.
Global Growth
While the island’s export performance has helped to drive expansion, growth in shipments may ease amid slowdowns in the U.S., China and Japan. A dimmer trade outlook gives Asia-Pacific central banks from South Korea to Thailand, India and Australia more scope to slow the pace of rate increases, after they boosted borrowing costs to damp price pressures.
“The risks to second-half growth come from fiscal stimulus exits by overseas governments, since Taiwan’s exports depend on the global economy,” Tsai Hung-kun, a director at the statistics bureau, told reporters after the GDP announcement. “Foreign governments and the emerging economies may also tighten monetary policy to control asset bubbles, and that would affect growth and demand.”
Taiwan’s current-account surplus probably widened to $11 billion in the three months through June, from $9.9 billion in the first quarter, while export orders climbed 20.5 percent in July after gaining 22.5 percent the previous month, separate Bloomberg polls showed.
Improving Ties
President Ma Ying-jeou has sought to improve ties with China, Taiwan’s biggest trading partner, since taking office in May 2008. The initiatives have included better communication, transport and tourism links.
Marriott International Inc., the largest U.S. lodging chain, Le Meridien and W Hotels plan to open their first hotels in Taiwan to cater for rising numbers of Chinese tourists.
Ma’s government agreed Taiwan’s first trade accord with China in June and the island’s parliament approved the Economic Cooperation Framework Agreement this week. China has viewed Taiwan as a renegade province since the two split after civil war in 1949.
To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net.
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