DBS raises growth projection for Taiwan’s GDP; Fitch retains forecast

Taipei--DBS, a Singapore-based banking group, has upgraded its growth forecast for Taiwan's 2017 gross domestic product (GDP) to 2.5 percent, citing improved exports since the beginning of the year.

However, Fitch Ratings has retained its estimate of 1.7 percent growth in 2017, saying household debt has been increasing in Taiwan.

In its latest forecast, DBS revised its December estimate of 2.1 percent GDP growth to 2.5 percent, saying that Taiwan's exports, which account for about 60 percent of its GDP, have been recovering on solid global demand.

The DBS projection was more upbeat than that of the Taiwan government, which gave a 1.92 percent growth forecast in February, an upgrade from 1.87 percent last November.

In February, Taiwan's exports soared 27.7 percent from a year earlier to US$22.66 billion, recording year-on-year growth for the fifth consecutive month.

In the first two months of the year, exports rose 16.2 percent year-on-year to US$46.40 billion, the highest for the January-February period in U.S. dollar terms since the figure hit US$46.60 billion in the first two months of 2011.

DBS economist May Tieying said Apple Inc.'s expected launch of its new iPhones in the second half of this year will help strengthen Taiwan's 2017 exports, which will also benefit from a solid U.S. economy as the U.S. is one of the biggest buyers of Taiwan's products.

However, Taiwan's expected 2.5 percent GDP growth is unlikely to prompt the local central bank to raise its key interest rates any time soon, the DBS said, although the U.S. Federal Reserve is likely to hike rates at its March 14-15 meeting.

Meanwhile, Fitch was more cautious about Taiwan's 2017 GDP, saying that high household debts could hamper economic growth and slow growth of the banking sector.

In maintaining its 1.7 percent growth forecast for 2017, Fitch said household debt in Taiwan had increased "noticeably" since 2010.

"High household debt is likely to pose a constraint to consumption spending and economic growth, which under our baseline is likely to remain muted at 1.7 percent in 2017," it said.

It projected, however, that Taiwan's GDP would grow 2 percent in 2018.

Source: Focus Taiwan News Channel